## TECHNICAL SUPPORT DOCUMENT

30 TAC Chapter 101, Subchapter H, Division 1 Emission Credit Banking and Trading §§ 101.302, 101.305, 101.306

Rule Project Number: 2005-054-101-PR

Rule Project Number: 2006-053-101-PR



## March 1 6 , 2010

FOR FURTHER INFORMATION CONTACT: Ms. Adina Wiley, United States Environmental Protecti on Agency Region 6, Air Permits Section (6PD-R), 1445 Ross Avenue, Dallas, Texas 75202-2733, (214) 665-2115.

### Subject : Review of Pro posed Revisions to the Emission Credit Banking and Trading Program, submitted October 24, 2006 (Rule Project Number 2005-054-101- PR) and August 16, 2007 (Rule Project Number 2006-053-101-PR)

Contents:

Executive Summary I. Background II. Summary of State Subm it t als III. Technical Reviewof State Subm

it tal IV. Conclusion V. 

### 2

### I. Executive Summary

What action s are

evaluated in this Technical Support Document?

This technical support document (TSD) reviews two proposed revisions to the Texas State Im plementation Plan (SIP) concerning the Em issio n Credit Banking and Trading Program
, referred to el sewhere in this document as the Em issio n Reduction Credit (ERC) program

. This review will determine if the ERC program revisions are consistent with the requirements of the Clean Air A ct and EPA ’ s policy and guidance.

October 2 4, 2006 On October 4, 2006, the Texas Commission on Environmental Quality (TCEQ) adopted  revisions to the ERC program to address the condi

ti ons of EPA ’ s final conditional approval of th e DERC Program , Septem ber 6 , 2006 ( 71 FR 52703 ). Additionally, the TCEQ adopted revisions to the ERC program mandated by Texas Senate Bill (SB) 784. The Chairman of the TCEQ, Ms. Kathleen Hartnett White, submitted these provisions as a SIP revision in a letter dated October 24, 20 06 , f or rul e proj ect number 2005-054-101-PR

. On October 4, 2006, TCEQ al so adopted revi sio ns to the Di screte Em issio n Credit Banking  and Trading Program, referred to elsewhere in this document as the Discrete Emission Reduction Credit (DERC) program, and the Em issio ns Banking and Trading of Allowances (EBTA) Program . These revisions were also submitted to EPA on October 24, 2006, as part of rul e proj ect number 2005-054-101-PR. EPA is taking separate action on the DERC
program revisions in a separate rul emaking; therefore this TSD will not review the 2006 revisions to the DERC program. EPA is also taking separate action on the EBTA at a later date and in a separate rulemaking; therefore this TSD will not review the 2006 revisions to the EBTA program

.

Au gust 16 , 2007 On July 25, 2007, the TCEQ adopted revisions to the ERC program to address the  recodi ficat io n of the nitrogen oxide (NO X 

### ) rul es at 30 TAC Chapter 117. The Chairman of th e TCEQ, Ms. Kathleen Hartnett White, submitted these provisions as a SIP revision in a let ter dated August 16, 2007, for rule project number 2006-053-101-PR

. At the same time that TCEQ adopted revisions to the ERC program on July 25, 2007, TCEQ  also adopted revisions to the general air quality rules, the Mass Emissions Cap a nd Trade (MECT) program , the DERC Program , and the System Cap and Trade (SCT) Program

. These revisions were also submitted to EPA on August 16, 2007, as part of rule project number 2006-053-101-PR. EPA is taking separate action on the DERC program revisions in a separate rulemaking; therefore this TSD will not review the 2007 revisions to the DERC
program . EPA i s also taking separate action on the SCT program at a later date and in a separate rulemaking; therefore this TSD will not review the 2007 revisions to the SCT
program . EPA approved the 2007 revisions to the MECT program through a direct final acti on on July 16, 2009 (74 FR 34503). 3

### What action has EPA taken on the ERC Program s?

On September 6, 2006, EPA promulgated a final approval of the ERC program (71 FR 52698 ). Also on Septem

ber 6, 2006, EPA prom

ulgated a final conditional approval of the DERC program (71 FR 52703 ). Our conditional approval of the DERC program is contingent upon TCEQ sati sfactorily addressing the terms of their September 8, 2005, com

mit ment l etter(available in the FDMS docket for this action) , which included two provisions addressing the ERC program. Because EPA fully approved the ERC program on September 6, 2006, the ERC provisions in the Septem ber 8, 2005, com

mit ment let ter can be decoupled from EPA ’ s acti on on the DERC conditional approval. Accordingly, this TSD will review the 2006 and 2007 revisions to the ERC
program to determ

ine if the revisions com

ply wit h the Clean Air Act and EPA regulations, and are

cons ist en t wi th EPA ’ s policies

. 4

### II. Background of the State Submittal

What is Air Emissions Trading?

Air emissions trading programs are designed to promote flexibility and innovation in

com plying wit h State and Federal emission requirements. Air emissions t rading programs

cr eate a market place for emission reductions implemented by source 1 and needed by source 2. For exam

ple, source 1 creates a marketable emissions reduction by reducingi ts emissio ns below the level it is required to meet, and below the level it has been mee ti ng

. Source 1 then sells or trades these reductions as credits to another source that is then allo wed to rel ease emissions above its required levels. In return for this flexibility, source 2 m ust purchase additional credits beyond those needed to comply, therefore reducing overall emissions. Emissions trading uses market forces to reduce the overall cost of

com pliance for sources, while maintaining emission reductions and environmental benefits.

What is an Economic Incentive Program (EIP)?

An EIP is a regulatory

programthat achieves an air quality objective by providing marketbased incentives or information to emission sources. A uniform emission reduction requirement, based for instance on installation of a required emission control technology, do es not take account of variations in processes, operations, and control costs across sources even of the same type, such as electric utilities, or petroleum refiners. By providing flexibilit y in how sources meet an emission reduction target, an EIP empowe rs sources to fi

nd the means that are most suitable and most cost-effective for their particular circumstances.

In addition, an EIP can create incentives for sources to go beyond an emission reduction target. By

setti ng a price on pollution and po llut io n reductions through a fee-based approach or a tradi

ng program, some sources can realize an economic gain or avoid additional costs by selling excess emission reductions, or making the reductions for less th an the cost i

mposed by a fee. Because of t he improved efficiency, EIPs may also lead to achieving air quality goals more quickly.

What is the status of EIP programs in Texas?

TCEQ has adopted six

EIP programs into state regulations. The regulations are found in Divisio ns 1 through 6 of

30 TAC C hapter 101, Subchapter H. The six EIP programs in Texas are summarized in Table II - 1. Additionally, TCEQ has adopted one f ederal tradi ng program into state regulation, found in Divisions 7 of 30 TAC Chapter 101, Subchapter H. 5Table II - 1 TCEQ EIP Tr ading Programs and Regional Applicability

TCEQ Trading Program Geographical / Ozone Non-attainment Regions

DFW HGB BPA El Paso East and Central Texas West Texas

ERC Optional Optional Optional n/a n/a n/a

EBTA n/a n/a n/a Mandatory Mandatory Mandatory

MECT n/a Mandatory n/a n/a n/a n/a

DERC Optional Optional Optional Optional Optional Optional

SCT Optional Optional Optional n/a Optional n/a

HECT n/a Mandatory n/a n/a n/a n/a

CAIR Federally Mandated Trading Program

Mandatory

means that sources inthe region must participate in the EIP program. Optional means that sources in the region have the option to participate in the EIP program.

n/a - The EIP does not apply to the geographical region. DFW - Dallas Ft Worth ozone nonattainment area for both1-hour and 8-hour ozone standard. HGB - Houston/Galveston/Brazoria ozone nonattainment area for both 1-hour and 8-hour ozone standard. BPA - Beaumont/Port Arthur ozone nonattainment area for both 1-hour and 8-hour ozone standard. El Paso - El Paso ozone n onattainment area for 1-hour ozone standard. El Paso is maintenance for 8-hour ozone standard. East and Central Texas - Those counties east of Interstate Highway 35. West Texas - Those counties west of the counties in the East and Central Texas area, exc luding El Paso.



### The TCEQ EIP regul ati ons are summarized below:

1. Em

issio n Credit Banking and Trading (ERCs) (30 TAC Chapter 101, Subchapter H, Di visio n 1)

The Emission Credit Banking and Trading EIP or Emission Reduction Credit (ERC) program

f or VOC and NO X

### i

n ozone nonattainment areas was first adopted by Texas at 30 TAC § 101.29 on December 23, 1997. Effective January 18, 2001, § 101.29 was repealed and Chapter 101, Subchapter H, Divisions 1, 3, and 4 were created. Thi s acti on created separate di v isio ns for the ERC, MECT, and DERC
programs. The submittal effective April 14, 2002, amended §101.302. The submit tal effective January 17, 2003, completely reorganized the ERC and DERC
program rul es into more standardized formats pa rallel to each other, with a rule structure whi ch followed a process of recognizing, quantifying, and certifying reducti ons as credits while explaining the guidelines for trading and using creditable reductions. The 2003 submittal amended §§ 101.300, 101.3 01, 101.302, 101.303, 101.304, 101.306, 101.309, and 101.311. The Decemb er 6, 2004, 6

### submit tal amended § § 101.300, 101.302, 101.303, 101.304, and 101.311. Our final approval on September 6, 2006, acted on the original submission of the ERC
program and all subsequent revisions through the December 6 , 2004 submittal.

Divisio n 1 defines emission credits (ECs) in terms of a rate (tons per year). Em issio n credits can be generated and banked from stationary sources as emission reducti on credits (ERCs) or generated and banked from mobile sources as mobile emissio n reducti on credits (MERC s ). The ERCs from the bank have traditionally been used as offsets for permitting major new or modified facilities. ERCs have also been banked and traded for alternative compliance with Reasonably Available Control Technology (RACT) requi rements. MERCs have not been banked or traded under the program to date. On December 6, 2004, TCEQ submitted revisions to the SIP that expand ed the ERC program

to cover reducti ons of criteria pollut ants (excluding lead) or precursors of criteria pollutan ts f or whi ch an area is designated nonattainment. EPA published a final approval of the ERC program on Septem ber 6, 2006, 71 FR 52698.

Si nce our final approval, TCEQ has revised the ERC program to address the

com mit ment s of the DERC conditional approva l. Additionally, the TCEQ adopted revisions to the ERC program consistent with the requirements of Senate Bill 784, adopted duri

ng regular session, 2005, of the 79 th

### Texas Legislature. Senate Bill 784 allows for great erf

lexibilit y in the generation and use of international emission reducti ons. These revisions were adopted by the TCEQ on October 4, 2006, and became effective on October 26, 2006. The adopted regulations were submitted to EPA as a SIP revision on October 24, 2006. TCEQ has also promulgat ed revisions to the ERC program that update the cross-references to the new numbering structure in 30 TAC Chapter 117. These revisions were adopted on July 25, 2007, and became effective on August 16, 2007. The adopted regulations were submitted to EPA a s a SIP revision on August 16, 2007.

2. Em

issio ns Banking and Trading of Allowances (EBTA) (30 TAC Chapter 101, Subchapter H, Division 2)

The Texas legislature passed Senate Bill 7 (SB7) in 1999 to deregulate electric utilit ies. SB 7 provided for a cap and trade program f or grandfathered electric generating facilities (EGFs). The EBTA program provides for an emission reducti on cap which provides for a 50% reduction in NO X

### em issio ns from EGFs and a 25 % reducti on i

n SO 2 

### em issio ns from solid fuel EGFs. T he EBTA program began operation in 2003. Allowances for NO X

### and SO 2 

### are deposi ted i nt o each EGFs compliance account annually. The EGFs will be allowed to purchase, bank or sell allo wances to meet operati onal demands. The EBTA program i s divided int o thr ee regions; East and West Texas as divided by Interstate Highway 35 and th e El Paso regi on (consisting of El Paso County; Juarez, Mexico; and Sunland Park, New Mexico). The TCEQ has revised the EBTA to restructure the 7

### int ernational trading provisions to p arallel those found in the Division 1 and 4
programs, and to add an audit mechanism. EPA has taken no action on the EBTA
program to date.

3. Mass Emissions Cap and Trade (MECT) Program (30 TAC Chapter 101, Subchapter H, Division 3)

The MECT program

was adopted as a State regul ati on on December 6, 2000. This program is mandatory for stationary facilities that emit NO X

### i n the HGB ozone nonattai

nment area which are subject to emission specifications in the TCEQ NO X

### rul es at 30 TAC Chapter 117. 310, 117.121 0 , and 117. 2010 ; and which are located as a site where they collectively have an uncontrolled design capacity to emit 10 tons per year or more of NO X 

### . The program set a cap on NO X 

### emissio ns beginning January 1, 2002, with a final reduction to the cap occurri ng in 2007. Facilities are required to meet NO X

### allo wances on an annual basis. Facilit ies may purchase, bank, or sell their allowances. The program has a provision to allow a facility to use credit generated through the Divis io n 1 EIP (ERCs) to permanently increase the allowances for the individual facility in the MECT i f th e credits were generated for NO X

### i n the HGB area before December 1, 2000. The program

al so has a provision to allow a facility to use credits generated th rough the Division 4 EIP (DERCs) in lieu of allowances if they are generated in th e HGB area. EPA published a final rule approving the MECT program (except fo r the use of DERCs in the MECT, which we deferred acting on until our action on the DERC rule) on November 14, 2001 (66 FR 57252). Texas subsequently revised the MECT program in SIP submittals dated January 31, 2003 and December 6, 2004. EPA published a final approval of the MECT program revisions on September 6, 2006 (71 FR 52698), including revisions to the MECT
necessary to accom plish the shift in attainment strategy from 90 percent control of industrial NO X

### sources to 80 percent control i n the HGB area. The approved revisions also approved the use of discrete emissions credits generated from stati onary sources (DERCs) o r mobile sources (MDERCs) i n lieu of MECT allo wances. Si

nce our 2006 final approval, TCEQ has prom ulgated revisions to th e MECT to update the cross-references to the Chapter 117 NO X

### rul es. EPA subsequently approved the revisions to the MECT through a dir ect final action on July 16, 2009 ( see 74 FR 34503).

4. Discrete Emission Credit Banking and Trading (DERCs) (30 TAC Chapter 101, Subchapter H, Division 4)

The DERC program was first adopted by the state at 30 TAC § 101.29 on December 23, 1997. Effective January 18, 2001, § 101.29 was repealed and Chapter101, Subchapter H, Divisions 1, 3, and 4 were created. This action created separate divisions for the ERC, MECT, and DERC programs. Discrete emissio n credits (DECs) are quantified, banked and traded in terms of mass (tons), 8

### not a rate as i s the case with ECs. DECs may be generated from stationary sources and banked as discrete emission reduction credits (DERCs) or may be generated from mobile sources and banked as mobile discrete emission reduction credits (MDERCs). DECs may be generated and used state wide and can apply to all criteria pollutants, with the exception o f lead. Tradi ti onally DECs have been used for RACT compliance for VOCs and NOx. Amendment s to th e MECT
program were adopted on October 18, 2001; these amendments also included changes ma de pri

marily fo r cl arification to §§ 101.370, 101.372, and 101.373 in th e DERC program . The DERC program was amended again effective April 14, 2002, to i nclude the provisions in Texas Senate Bill 1561 for air emissions trading across international boundar ies. The submitt al effective January 17, 2003,

com pletely reorganized the ERC and DERC program rules into more standardized fo rmats parallel to each other, with a rule structure which followed a process of recognizing, quantifying, and certifying reductio ns as credits while explaining the guidelines for trading and using creditable reductions. The December 6 , 2004 submit tal amended §§ 101.370, 101.373, 101.37 4 , and 101.376. Our final conditional approval on September 6, 2006, acted on the original submis sio n of the DERC program and all subsequent revisions through the December 6 , 2004, submit tal (71 FR 52703). Our conditional approval is contingent upon TCEQ sati sfactorily addressing the terms of their September 8, 2005, commitment letter.

Si nce our c onditional approval, TCEQ has revised the DERC program to address th e com mit ment s of the conditional approval. Additionally, the TCEQ adopted revisions to the DERC program consistent with the requirements of Senate Bill 784, adopted duri

ng regular session , 2005, of the 79 th

### Texas Legislature. Senate Bill 784 allows for great erf lexibilit y in the generation and use of international emissio n reductions. These revisions were adopted by the TCEQ on October 4, 2006, and became effective on October 26, 2006. The adopted regul ati ons were submit ted to EPA as a SIP revi sio n on October 24, 2006. TCEQ has also
prom ulgated revisions to the DERC program that update the cross-references to th e new numbering structure in 30 TAC Chapter 117. These revisions were adopt ed on July 25, 2007, and became effective on August 16, 2007. The adopted regulations were submitted to EPA as a SIP revision on August 16, 2007.

5. System

Cap Tradi

ng (SCT) (30 TAC Chapter 101, Subchapter H, Division 5)

The TCEQ adopted system caps forel ectri c generating facilities operating in the BPA, DFW, and HGB ozone nonattainment areas and the attainment counties of east and central Texas at 30 TAC § 117.138 on September 26, 2001, effective October 18, 2001. EPA approved the system caps on Novem

ber 14, 2001 (66 FR 57244). The System

Cap Tradi

ng (SCT) program

adopted by

TCEQ on March 21, 2001, and submitted to EPA as a revision to the SIP in Rule Log Number 2000- 046-101-AI, provides flexibility for the electric industry in achieving the NO X 

### emiss io ns reductions necessary to achieve ozone attainment in the BPA, DFW, and 9

### HGB ozone nonattainment area and the attainment counties of east and central Texas while maintaining reliability of service. Individual sources under common ownership or control may be voluntarily grouped together in a system with a syst em cap on total

em issio ns from the sources in the system, established under 30 TAC Chapter 117 emissions limitations. Emission allowables may be transferred from source to source wi

thin the system, provided the cap is not exceeded. The SCT provi des a mechanism that streamlines the steps necessary for daily emission tradi ng by allowing the increase of system caps from corresponding system cap emissio n reductions in the same nonattainment or attainmen t area. The system

cap may be increased daily using a daily surplus, or on a 30-day rolling average using a 30-day rolling average surpl

us for the same time period. TCEQ has prom ulgated revisions to the SCT program to update the cross-references to the C hapter 117 NO X

### rul es. EPA has taken no action on the SCT program to date.

6. Highly-Reactive Volatile Organic Compound Emission Cap and Trade (HECT) Program (30 TAC Chapter 101, Subchapter H, Division 6)

The HECT program

was adopted as a State regul ati on on December 1, 2004. Thi s program i s mandatory for covered facilities including vent gas streams, flares, and cooling tower heat exchange systems that emit highly-reactive VOCs, as defined in § 115.10, and that are located at a si te subject to Chapter 115, Subchapter H. Facilit ies are required to meet HRVOC allowances on an annual basis. Facilities may purchase, bank or sell their allowances for use in the following control period. The program

has a provision to allow a facility to use credits of less-reactive VOCs generated through the Division 1 EIP (ERCs) in lieu of allow ances if they are generated in the HGB area. EPA published final approval of the HE CT
program on Septem

ber 6, 2006.

Clean Air Interstate Rule (CAIR) Program (30 TAC Chapter 101, Subchapter H, 7. Divisio n 7)

The Texas CAIR program was adopted as a State reg ulation on July 12, 2006, and submit ted as a SIP revi sio n on August 4, 2006. The Division 7 regulations inco rporate by reference the CAIR NO X

### Annual and SO 2 

### tradi ng programs as

a dopted by EPA on May 12, 2005 (70 FR 25162). Additionally, the Texas CAIR
pr ogram establishes a NO X

### allo cati on methodology and provisions for the

com pliance supplement pool to replace the provisions at subpart EE of 40 CFR part 97, the CAIR Fed eral Implementation Plan. EPA published a direct final approval of the Texas CAIR NO X

### A bbreviated SIP fo r the Phase I allocation
met hodology

on July 30, 2007 (72 FR 41453 ). TCEQ adopt ed revisions to the CAIR program on February 10, 2010 , to update the NO X

### allo cati on methodology and the incorporation by reference dates for the NO X

### annual and SO 2 

### tradi ng programs. These revisions will be submitted to EPA as a SIP revision. 10

### What has EPA considered in reviewing and evaluating the October 24, 2006 and

August 16, 2007 ERC SIP revisionssubmittal s?

“ Im proving Air Quality with Economic Incentive Programs” (EPA-452/R-01-001, January 2001) i s the EPA guidance document for reviewing and approving discretionary EIP submit tal s. The EIP Gui dance applies to the establishment of a discretionary EIP for attai ning or maintaining the national ambient air qu alit y standards (NAAQS) for criteria pollut ants. The EIP Gui dance takes precedence over the discretionary EIP guidance provided in prior documents such as the 1994 EIP ( April 7, 1994, 59 FR 16690, 40 CFR part 51, subpart U) and the gui dance in the emissio n tradi ng policy statement (ETPS) (December 4, 1986, 51 FR 43813). In addition, the Guidance represents EPA ’ s final acti on on the Open Market Trading Rule (August 3, 1995, 60 FR 39668 and August 25, 1995, 60 FR 44290). The January 2001 EIP Gui dance is th e most recent statement of agency policy and it supercedes prior statements of agency policy. The EIP Gui dance and oth er materi al considered will be included in the administrative record for the proposed rul e.

What does EPA mean by guidance?

The EIP Gui dance applies to discretionary EIPs, but it does not represent EPA ’ s final acti on regarding discretionary EIPs. Final action on any particular discretionary EIP, such as the ERC rule, occurs when EPA has approved or disapproved the EIP submitted as a SIP revision. The EIP Guidance describes elements of various types of discretionary EIPs, and phrases these elements in the imperative

– that i s, using the terms “must ” or

“ shall. ” Thi s is done only to signify that EPA would propose to approve a SIP submittal of a program

contai ning the indicated elements on grounds that under section 110(l) of the Clean Air Act (CAA), the SIP revision does not interfere with any applicable requirement concerning attainment, reasonable further progress, or any other applicable requi rement.

How will EPA act on an EIP SIP submittal?

Once an EIP SIP revision is submitted, EPA will take action through notice-and-comment rul e-making to determine if the statutory requirements have been met. Only action taken aft er the conclusion o f th at rul e-making would constitute final Agency action. EPA would take steps to expedi

te i ts proposed approval

i n the case of SIP revisions containing
programs that contai

n the elements of the EIP Guidance.

If a program that does not contai n the elements of the EIP Guidance for the type of
program that i s submitted, EPA will still seek to determine whether the applicable CAA requirements were met, and if so EPA would approve the submission. EPA would make
t he determination through notice-and-comment rule-making. 11

### III. Summary of the State Program

A complete section-by-section summary of the ERC program can be found in the ERC TSD dated Septem

ber 23, 2005, i

ncluded in the docket for this action. EP A developed this original ERC TSD for our initial approval action for the ERC program. This TSD will only evaluate the revisions to the ERC program as submitted on October 2 4, 2006 and August 16 , 2007 by

TCEQ.

October 2 4, 2006

30 TAC Chapter 101, Subcha pter H, Division 1

The proposed SIP revi sio n removes all references to international emission reductions from section 101.302 and relocates these requirements to new section 101.305. The proposed SIP revi sio n also revises section 101.302 to clarify the p rocedures for the use of an emission protocol as specified in the September 8, 2005, commitment letter from TCEQ to EPA.

The proposed SIP revi sio n creates new section 101.305 to contain all requirements for int ernational emission reductions. TCEQ has cre ated a separate secti on for opti onal reducti ons to allo w for separate federal rulemaking action as necessary.

The proposed SIP revi sio n amends section 101.306 to update the list of approved uses of ERCs to i nclude the use of ERCs as allowances in the Highly- Reactive Volatile Organic Com pound Em

issio n Cap and Trade program.

The TCEQ received four comment letters, one from EPA submitted on May 30, 2006.

August 16 , 2007

30 TAC Chapter 101, Subchapter H, Division 1

The proposed SIP revi sio n amends sections 101.302 and 101.306 to adopt the references to the newl

y renumbered 30 TAC Chapter 117 sections.

The TCEQ received two comment letters for this rulemaking, one from EPA submitted on March 23, 2007. 12

### IV. Technical Reviewof State Submittal

This technical review of the October 2 4, 2006 revisions to the ERC program at secti on s 101.302, 101.305, and 101.306 and th e August 16 , 2007 revisions to the ERC program at section s 101.302 and 101.306 consists of a comparison between the relevant CAA requirements and th e corresponding sections in the SIP submittal. Each SIP submittal is separately reviewed fo r com pleteness as a SIP submittal under Part 51, Appendix V. Next, a secti on-by-section review of the submittal in comparison to 40 CFR Part 51 is presented to det ermine whether the submittal satisfies the requirements for preparation, adopti on, and submittal of a SIP revision. Then the proposed SIP revisions are analyzed wit h res pect to the current SIP-approved ERC program l anguage and the EIP Guidance. A compari son of the proposed SIP revisions with section 110(l) of the CAA is presented to determ ine whether the proposed revisions interfere with any applicable CAA provisions. These analyses produce a written evaluation that will be used to make a determ inat io n o f whether or not the ERC program revisions in the October 24, 2006 and July 25, 2007 SIP submittal s are i n agreement with the CAA, other EPA policies or guidance

.

A. October 24, 2006 SIP Subm it tal 1. Part 51, Appendix V Completeness Determination 2. Revie w with respect to Part 51 3. Review with respect to the current SIP-approved ERC Program and the EIP Gui dance 4. R eview with respect to Section 110(l) of CAA

B. August 16 , 2007 SIP Subm it tal 1. Part 51, Appendix V Completeness Determination 2. Review with

respect to Part 51 3. Review with respect to the current SIP-approved ERC Program and the EIP Gui dance 4. Review with respect to Section 110(l) of CAA 13

### IV. A. Evaluation of the October 24, 2006 SIP Submittal

1. Evaluation of the October 24, 2006 SIP S ubm ittal with respect to Appendix V to Part 51

The criteria for completeness determination are found in Appendix V to Part 51 - Cri teri a fo r determ

ining the completeness of plan submissions and are outlined below:

1.0 Purpose: Thi s appendix V sets forth t he minimum criteria for determining whether

a State implement ati on plan submit ted fo r consideration by EPA is an of ficial submissio n for purposes of review under § 51.103.

1.1 The EPA shall return to th e submit ti ng of ficial any plan or revision th ereof which fails to meet the cri

teri a set f orth i n this appendix V, and request correcti ve acti on, identifying th e com

ponent(s) absent or insufficient t o perform a review of t he

s ubmit ted pl an.

1.2 The EPA shall info rm t he submit ti

ng of ficial whether or not a plan submissio n meets th e requirements of t his appendix V wit hin 60 days of E PA's receipt of

t he submit tal , but no l ater than 6 months after the date which the State was requ ir ed to submit t he plan or revision. I f a com pleteness determ

inat io n is not made by 6

mo nt hs from receipt of

a s ubmit tal
, th e submit tal s hall be deemed com

plete by operati on of

l aw on th e date 6 mo nt hs from receipt. A d eterm inat io n of

com pleteness under this paragraph means th at th e submissio n is an of ficial submissio n for purposes of §51.103.

The attached checklist outlines th e basic criteria included under 2.1, 2.2, and 2.3 of Appendix V. 14

### SIP Completeness Checklistfor the October 24, 2006 SIP Sub mittal Rule Log No: 2005-054-101-PR

Administ rati

ve Materials (2.1)

1. The package is sent with a formal submittal letter from the Governor or his or her designee requesting EPA's approval of the revision.

The SIP revision w

as submitted by a letter from Kathleen Hartnett White, Chairman of the Texas Commission on Environmental Quality, dated October 24, 2006. The SIP submittal w as received by EPA Region 6 External Affairs on October 31, 2006. Governor Rick Perry designated that the Chairman of the Texa s Commission on Environmental Quality w ould be his designee for SIP submittals in a letter dated May 21, 2002.

2. Evidence is included that the State has adopted the revision in the State code or body of regulations, or that the State has issued the permi t, order, consent agreement (hereafter document) in final form. This evidence would include the date of adopti on or f

inal issuance and the effective date of revision, if different from adoption/issuance date.

The revisions w

ere adopted by the Texas Comm i ssion on Environmental Quality on October 4, 2006, and became effective October 26, 2006.

3. Evidence is included that the State has necessary legal authority under State law to adopt and i

mplement the revision, e.g., a citation of the appropriate State authori ty

. The authority for promulgating changes to the Texas State Implementation Plan, Chapter 101 §§ 101. 30101.306, 101.372, 101.373, 101.376, and 101.378; the repeal of §§ 101.338; and new §§ 101.305, 101.338, 101.339, and 101.375 is found in the T

exas Clean Air Act, Chapter 382 of the Texas Health and Safety Code.

4. A copy

i s included of the actual regulation or document submitted for approval and incorporation by reference into the SIP including an indication of the changes made to the existing approved plan where applicable. The submittal shall be a
copy of the official State regulation document signed, stamped, and dated by the appropri ate State of

ficial indicat ing that it is fully enforceable by the State. The effective date of the regulatio n document shall, whenever possible, be indicated in th e document itself.

The October 24, 2006, submittal included a copy of the official State regulation document, signed, stamped, and dated by Kathleen Hartnett White, Chairman of 15

### the Texas Commission on Environmental Quality.

5. Evidence is included that the State followed all the procedural requirements of its laws and/or its constitution in the conducting and completing the adopti on/issuance of the plan.

The SIP submittal package include d a certi fication signed by Kevin McCalla

, Director of the Texas Commission on Environmental Quality General Law Division, that demonstrated the SIP submittal w as developed pursuant to 40 CFR 51.104.

6. Evidence is included that public notice was given of the pr oposed changes consistent with the procedures approved by EPA, including the date of publication of such notice, (e.g., notarized or certified copies of any public notices published in newspapers). (The notice should be at least 30 days prior to the publi c hearing(s).

Notices of public hearings w ere published in the follow ing new spapers on the date listed: Austin American Statesman: April 19, 2006  Beaumont Enterprise: April 17, 2006  Fort Worth Star Telegram: April 17, 2006  Houston Chronicle: April 17, 2006. 
A pub lic hearing w

as held in Austin, Texas, on May 22, 2006.

7. A certification is included indicating that public hearing(s) was/were held in accordance with the information provided in the public notice(s) and the State's laws and constitution, if applicable

. An order adopting revisions to the SIP signed by Kathleen Hartnett White, Chairman of the Texas Commission on Environmental Quality w as included. This order states that the public hearing w as conducted pursuant to Texas Health and Safety Code § 382.017 , Texas Government Code Chapter 2001, and 40 CFR § 51.102.

8. A compilation of public comments and the State's response is included.

The SIP submittal package did include a compilation of comments. TCEQ received w

ritten testimony from four parties during the comment period, including EPA Region 6, and did not receive oral testimony.

Technical Support (2.2)

The State should i

nclude the following technical information in its SIP revision request 16

### package.

1. Identification of all regulated pollutants aff ected by the revision is included.

Chapter 101, Subchapter H, Division 1 (ERC Program) applies to criteria  pollutants, and precursors, for which an area is designated nonatta in ment wi th the exception of lead. How ever, the SIP revision under review does

n ot change this applicability and therefore does not need to restate the list of regulated pollutants. Chapter 101, Subchapter H, Division 2 (EBTA Program) applies to NO X 

###  and SO 2



### . This SIP submittal amends a previously submitted SIP package for the EBTA program, in w hich the pollutants are identified. Chapter 101, Subchapter H, Division 4(DERC Program) applies to  criteria pollutants, and precursors, w ith the exception of lead. The SIP revision under review

does not change this applicability and therefore does not need to restate the list of regulated pollutants.

2. Identification of the locations of affected sources including the EPA attai nment /nonattai

nment designation of the locations and the status of the attai nment pl an for the affected area(s) is inc luded.

The SIP submittal, covering the ERC, EBTA, and DERC Rules, amend existing regulations for statewide trading programs. Additionally, each rule does contain an international trading component.

3. Quantification of the changes in SIP allowable emiss io ns from the affected sources is included. (Examples include estimates of changes in current actual emissions from affected sources and/or, where appropriate, quantification of changes in actual emissions from affected sources through calculations of the di fferences between certain baseline levels and allowable emissions anticipated if the revisions were approved.)

The SIP submittal, covering the ERC, EBTA, and DERC rules, amend existing regulations for statewide trading programs. The ERC and DERC programs establish economic incentive programsfor voluntary generation and use of emission reductions . Each program includes provisions for quantifying creditable emission reductions and increases. The EBTA program is mandated by Texas SB 7; w

hich establish ed reduction requirements of 50% from baseline NO X 

### emission levels and 25% from baseline SO 2 

### emission levels.

4. Demonstration is included that the NAAQS/PSD increments/RFP demonstration and visibilit y as applicable would be protected if the revision we re approved and implement ed. 17

### The SIP submittal amends existing trading programs. While these trading programs are part of the attainment demonstrations developed within the State, they are not the sole method of attaining or maintaining the NAAQS, PSD, RFP or visibility programs. Attainment demonstrations for each area using these programs must account for the emissions attributed to the banking and trading
programs.

5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient ai r quality standards for at least 10 years as required by §175A of the Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

Modeling information, if applicable, is required to support the propose d revision. 6.

Modeling information is not necessary to support th isSIP revision. Modeling is provided with attainment demonstrations accounting for the generation and use of emission reductions under the ERC, EBTA, and DERC programs.

7. Evidence is included where necessary, that emission limitations are based on conti nuous emission reduction technology ( e.g., add-on control s, i ndustrial/process equipment designs, reformulated materials, etc.).

This SIP submittal amends existing trading programs; it does not establish emission limitations.

8. Evidence is included indicating that a SIP revision contains e missio n limit ati ons, work practi ce standards, and recordkeeping/reporting requirements to ensure stated em issio n levels.

This SIP submittal amends existing trading programs and does not contain or revise emission limitations or w orkplace standards. Recor dkeeping and reporting requirements for the trading programs have previously been submitted to EPA.

9. Com

pliance/enforcement strategies including how compliance will be determined in practice (including at what frequency).

The SIP submittal amends existing trading programs. The compliance strategies 18

### for each program w ere previously submitted to EPA. Additionally, each source participating in banking and trading programs must abide by the conditions of its respective permit.

10. As appropriate, spe cial economic and technological justifications are included per applicable EPA policies or an explanation why such justifications are not necessary should be included. For example, requests for alternative RACT may require such justification.

These just ifications are not necessary for this SIP revision.

The October 24, 2006 SIP submittal (Rule Project No. 2005-054-101-PR) meet s the completeness criteria established in 40 CFR part 51, Appendix V. 19

### IV. A. Evaluation of the October 24, 2006 SIP Submittal

2. Evaluation of the October 24, 2006 ERC revisions with respect to 40 CFR 51

Requirements for the preparation, adoption, and submittal of implementation plans can be fo und in 40 CFR Part 51. The October 24, 2006
, proposed ERC revisions were evaluated
ag ainst the applicable requirements in Part 51. Thi s analysis is included in Table IV- A2 belo w. The revisions to th e DERC and EBTA program al so submitted on October 24, 2006, as revisions to the SIP are not included in the analysis below. The DERC revisio ns and EBTA

program wi ll be acted on separately by EPA at a later date.

Table IV- A2 : Analysis of Part 51 Requirements

Part 51

– Requirements for Preparation, Adoption, and Submittal of Implementation

Plans ERC Program Revisions 30 TAC §§ 101.302, 10 1.305, 101.306

Subpart A

–

Emission Inventory

Reporting Requirements The ERC Program is a discretionary EIP for voluntary participation. The program does not affect the current TX SIP requirements for Emission Inventory

Reporting.

Emission reporting requirements specific to the ERC program are contained in 30 TAC 101.309 and were approved by EPA in our September 6, 2006 final approval. Subparts B

–

E [Reserved] Not applicable. Subpart F

–

Procedural Requirements Subpart F

– Procedural Requirements § 5 1.100 Definitions § 51.100 is not applicable to the SIP submittal under review in this TSD. § 51.101 Stipulations § 51.101 is not applicable to the SIP submittal under review in this TSD. § 51.102 Public Hearings States must conduct one or more pu blic  hearings Public hearings will only be held after  reasonable notice, given at least 30 days prior to the date of the hearing The state must submit with the revision a  certification that the hearing was held in accordance with this section TCEQ held a p ublic hearing on May 22,  2006, in Austin, Texas. The public hearing was held after reasonable  notice was given. TCEQ published notice of the public hearing in the following newspapers on the dates listed below: April 17, 2006 in the Beaumont  Enterprise; April 17, 2006 in the Fort Worth Star Telegram; April 17, 2006 in the Houston Chronicle;  April 19, 2006 in the Austin American  Statesman. TCEQ submitted a certification that the public  hearings were held in accordance with § 51.102. 

### 20§ 51.103 Submission of plans, preliminary

review of plans The state makes an official plan submission to  EPA only

when the submission conforms to the requirements of Part 51, Appendix V. The state delivers 5 copies of the plan with a  letter giving notice of the action to the EP A regional office. Please see section IV.A of this TSD for the evaluation of this SIP revision with respect to the Part 51, Appendix V Checklist.

The SIP submission meets the requirements for completeness.

§ 51.104 Revisions States may

revise the plan from time to time  EPA will approve revisions only after  appropriate public hearing requirements have been met Revisions must be submitted in accordance  with 51.103 TCEQ submitted the revisions to the ERC and Program on October 24, 2006 . This SIP revision, as demonstrated previously in this table and section IV.A of this document, has satisfied the public hear ing requirements of § 51.102 and the requirements of § 51.103.

Subpart G

–

Control Strategy Subpart G

– Control Strategy § 51.110 Attainment and Ma intenance of National Standards Requirements found in § 51.110 are not applicable to the SIP submittal under review in this document. The ERC program is adiscretionary EIP that provide s for the voluntary generation and use of emission reduction credits

. The ERC program is
not an integral control strateg y in any of the Texas Attainment Demonstrations. However, EPA expects the TCEQ to account for the generation and use of ECs in all attainment demonstrations. § 51.111 Description of Control Measures Requirements found in § 51.110 are not applicable to the SIP submittal under review in this document. The ERC program does not establish control strategies for Texas, rather the program provides for the voluntary

generation and use of ECs

. § 51.112 Demonstration of Adequacy Requirements found in § 51.112 are not applicable to the SIP submittal under review in this document. Since the ERC program is notan integral piece of an attainment strategy, it is not necessary that the ERC program demonstrate adequac y for maintaining a national standard. § 51.113 Reserved Not applicable. § 51.114 Emissions Data and Projections Requirements found in § 51.114 are not applicable to the SIP submittal under review in this document. As the ERC program is not part of an attainment demonstration, the ERC program SIP revision does not need to provide a detailed emission inventory and summary

of projected emission levels after the implementation of control strategies. However, the ERC program do es require that generators an d users submit applications to the TCEQ that estimate and verify the emission reductions that are generated and/or used. 

### 21§ 51.115 Air Quality Data and Projections Requirements found in § 51.115 are not applicable to the SIP submittal under review in this document. The ERC program is not part of an attainment plan, therefore it is not necessary that this SIP submittal include s data on existing air quality or summarize expected air quality impacts from the implementation of control strategies. § 51.116 D ata Availability

The State must make available to the public all data and calculations used in the preparation of each plan or plan revision.

Each plan must provide for public availability of emission data reported by source owners or operators. Requirem ents found in § 51.116 are applicable to the ERC program SIP revisions.

TheTCEQ provided the public the opportunity to participate in stakeholder meetings in the rulemaking development process, and the public received comment periods on the proposed plan

. The Texas Clean Air Act, Texas Health and Safety Code at Section 382.040 requires that all information submitted to the TCEQ for compliance purposes be made available to the public, unless a

wr itten request for nondisclosure is approved. § 51.117 Ad ditional provisions for lead Requirements found in § 51.117 are not applicable to the SIP submittal under review in this document. The ERC program at § 101.302(a) specifically excludes lead as an applicable pollutant of the
program. § 51.118 Stack Hei ght Provisions Requirements found in § 51.118 are not applicable to the SIP submittal under review in this document. The ERC program is adiscretionary program for voluntary generation and use of ECs and does not involve good engineering practices for sta ck heights. § 51.119 Intermittent Control Systems Requirements found in § 51.119 are not applicable to the SIP submittal under review in this document. The ERC program is a discretionary program for voluntary generation and use of ECs and does not requi re intermittent control systems. § 51.120 Requirements for State Implementation Plan Revisions relating to Motor Vehicles Requirements found in § 51.120 are not applicable to the SIP submittal under review in this document. The ERC programdo es provide for the generation and use of mobile emission reductions, but that is not related to the part 51 requirements for SIP revisions relating to motor vehicles. § 51.121 Findings and requirements for submission of State Implementation Plan Revisions relating to emissions of oxides of nitrogen Requirements found in § 51.121 are not applicable to the SIP submittal under review in this document. § 51.121 establishes the requirements for the NO X SIP Call; Texas was not subject to the NO XSIP Call. § 51.122 Emiss ions reporting requirements for SIP revisions relating to budgets for NO Xemissions. Requirements found in § 51.122 are not applicable to the SIP submittal under review in this document. § 51.122 establishes the emission reporting requirements for the NO XSIP Call; Texas was not subject to the NO XSIP Call. 

### 22§ 51.123 Findings and requirements for

submission of State Implementation Plan Revisions relating to Emissions of Oxides of Nitrogen pursuant to the Clean Air Interstate Rule Requirements found in § 51.12 3 are not applicable to the SIP submittal under review in this document. § 51.12 3 establishes the requirements for the NO X Annual and Ozone season programs for the Clean Air Interstate Rule(CAIR). § 51.124 Findings and requirements for submission of State Implementation Plan Revisions relating to Emissions of Sulfur Dioxide pursuant to the Clean Air Interstate Rule Requirements found in § 51.124 are not applicable to the SIP submittal under review in this document. § 51.124 establishes the programrequirements for the CAIR SO 2 Programs. § 51.125 Emissions reporting requirements for SIP revisions relating to budgets for SO 2 and NO X emissions. Requirements found in § 51.12 5 are not applicable to the SIP submittal under review in this document. § 5 1.12 5 establishes the emission reporting requirements for the CAIR NO Xand SO 2trading
programs. Subpart H

–

Prevention of Air Pollution Emergency Episodes Requirements found in 51, Subpart H are not applicable to the SIP submittal under review in this do cument. The ERC program is a discretionary program for the generation and use of ECs and is not part of the Texas air pollution emergency episode plan. Subpart I

–

Review of New Sources and Modifications § 101.306(a)(1) provides that ECs can be used as N SR permit offsets. § 101.306(a)(4) provides that ECs may be used for NSR netting by

the original applicant if not used, sold, reserved for use, or otherwise relied upon as provided in § 116.150.

EPA reviewed the use of ERCs and MERCs as NSR offsets and ne tting as part of our approval of the program, and found these provisions of the ERC program to meet the NSR offset requirements of section 173 of the CAA and 51.165. The revisions to the ERC program submitted in this SIP submittal do not revise § 101.306( a)(1) or (a)(4). Subpart J

–

Ambient Air Quality

Surveillance Requirements found in 51, Subpart J are not

applicable to the SIP submittal under review in this document. Ambient air quality surveillance is not part of the ERC program

. Subpart K

–

SourceSurveillance Subpart K

– Source Surveillance § 51.210 Each plan must provide for monitoring the status of compliance with rules and regulations that set forth any

portion of the control strategy

. The Texas ERC program was developed and submitted in accor dance with the Texas Health and Safety Code. Texas enforcement provisions are not ty pically in the State ’ s individual rules but are separately codified. Texas Water Code Chapter 7 contains the State ’ s statutory provisions for enforcement of programs deve loped according to the Texas Health and Safety Code; i.e, the Texas ERC program . Section 382.111 of the Texas Health and Safety

Code provides the ability to enter and periodically

inspect stationary

sources. Section 382.021 establishes that the Texas Com mission on Environmental Quality

can determine the necessary sampling and detection methods used to demonstrate compliance with an emission limitation. § 5 1.211 The plan must provide for l egally enforceable procedures for r equiring stationary

sources t o maintain records and report the following to the State: Information on the nature and amount of  emissions from the stationary source; and Other information as necessary for the State to  determine wh ether the sources are in compliance. 

### 23§ 51.212 The plan must provide for periodic testing

and inspection of stationary sources. Additionally
, the plan must establish a system for detecting violations and include enforceable test methods. § 51.213 The plan must contain procedures for obtaining and maintainin g data on actual emissions reductions achieved as a result of implementing transportation control measures. § 51.213 is not applicable to the ERC program

. While the ERC programdo es provide for the generation and use of

mobile emission reductions
, these r eductions must be surplus to transportation control measures in the SIP.

§ 51.214 The plan must contain legally enforceable procedures to require stationary sources subject to emission standards as part of the applicable plan to install, calibrate, maint ain, and operate continuous emission monitoring systems. The ERC programdo es not establish emission standards under the Texas SIP that would mandate the installation or use of continuous emission monitoring systems. However, section 101.302(d)(2) provide s the quantification procedures for ECs , and continuous monitoring data is an acceptable data source for actual emissions data in the event that the SIP approved testing and monitoring methods in Chapter 115 and Chapter 117 are not available. Subpart L

– Legal Authority Subpart L

– Legal Authority § 51.230 Each plan must show that the State has the necessary

legal authority

to carry out the plan, including the authority

to adopt emission standards and limitations necessary for attainment of the NAAQS, enf

or ce applicable laws and regulations and seek injunctive relief. The ERC program was developed and submitted in accordance with the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code. The Texas Health and Safety Code and the enforcement provisions in the Texas Water Code provide TCEQ the necessary

legal authority

to implement the SIP. A more detailed discussion immediately follows this table.

§ 51.231 The provision of law or regulation which the State determines provides the authoritie s required must be specifically identified and copies must be submitted with the plan. Texas identified in the submittal package that the SIP revision was developed in accordance with the Texas Health and Safety

Code. EPA Region 6 does not require the St ate to submit copies of laws and regulations that have been submitted for prior SIP submittals.

§ 51.232 A state government agency other than the State air pollution control agency may be assigned responsibility

for carry ing out a portion of the plan. The ERC Program SIP revisions identified the TCEQ as the agency

responsible for implementing the SIP. Subpart M

–

Intergovernmental Consultation

Each plan must identify

organizations by

title that will participate in the development, implementation, and enforcement of the plan. The ERC Program SIP revision identified the TCEQ as the agency

responsible for developing, implementing, and enforcing the SIP. 

### 24Subpart N

– Compliance Schedule The ERC programestablish es an economic incentive program for the vo luntary generation and use of ECs

. Th is programdo es not establish a compliance schedule for any NAAQS, and therefore do not need to address the requirements of 40 CFR part 51, subpart N.

However, the ERC program provide s mechanisms by which users of E Cs must demonstrate they have enough credits to cover the ir use obligations, see section 101.306. Section 101.309 provide s for program audits and reporting through which the TCEQ will demonstrate to EPA and the public that the E RC program is operating eff ectively. Subpart O

–

Miscellaneous Plan Content Requirements The ERC program SIP revision identified that no fiscal implications are anticipated for TCEQ or any other state/local government through the implementation of these rules. Additionally, it was estimated that the public benefit as a result of implementing these revisions would be a continued reduction in air contaminants. Subpart P

–

Protection of Visibility The ERC program SIP revision is not submitted as part of Texas ’ s plan to protect visi bility

. Subpart Q

–

Reports The ERC program SIP revision does not revise the existing reporting requirements for the emission inventory in the Texas SIP. EPA approved the emission inventory

requirements at 30 TAC § 101.10 on August 26, 1994 (59 FR 440 36). Subpart R

–

Extensions Requirements found in 51, Subpart R are not applicable to the SIP submittal under review in this document. The ERC program SIP revision submittal is not a request for an 18-month extension. Subpart S

–

Inspection/Maintenance Program Requirements Requirements found in 51, Subpart S are not applicable to the SIP submittal under review in this document

. The ERC programestablish es a discretionary

economic incentive program and is not related to an inspection/maintenance program. Subpart T

–

Conformity

to State or Federal Implementation Plans of Transportation Plans, Programs, and Projects Developed, Funded, or Approved Under Title 23 U.S.C or the Federal

Transit Laws TheERC program does not interfere with the transportation conf

or mity budgets developed for each nonattainment and maintenance area pursuant to subpart T. The ERC program provide s that mobile sources can generate mobile emission reduction credits, but these credits most be surplus to the baseline emissions in the SIP (section 101.304(b) ). 

### 25Subpart U

– Economic Incentive Programs 40 CFR part 51, s ubpart U establishes requirements for statutorily

mandated economic incentive programs under sections 182(g)(3), 182(g)(5), 187(d)(3), or 187(g) of the CAA

. The ERC program i s a discretionary economic incentive program, and therefore not subject to the requirements of subpart U. Subpart W

–

Determining Conformity of General Federal Actions to State or Federal Implementation

Plans The ERC program does not interfere with the

r equirements for general conformity in subpart W. All emission reductions, whether from stationary or mobile sources, must be surplus to the baseline emissions in the SIP. Subpart X

–

Provisions for Implementation of 8-hr Ozone NAAQS Requirements found in 51, Subpart X are for the implementation of the 8-hour ozone NAAQS. While ECs can be generated and used in 8-hour nonattainment areas, the ERC program is not part of the implementation of the 8-hour ozone standard. EPA expects that the TCEQ will account for the generation and use of ECs in all 8-hour attainment demonstrations. Subpart Y

–

Mitigation Requirements The Chapter 101 revisions do not create procedures by which Texas could exclude air quality data due to exceptional events. Subpart Z

–

Provis ions for Implementation of PM2.5 National Ambient Air Quality Standards Requirements found in 51, Subpart X are for the

implementation of the PM2.5 NAAQS. The Chapter 101 revisions do not establish procedures for implementing the PM2.5 NAAQS. 

### 26

### Does TCEQ have the necessary legal authority to implement the revision s to 30 TAC

Sections 101.302, 101.305, 101.306 as part of the SIP?

Texas enforcement provisions are not typically in the State ’ s individual rules but are separately codified. Texas Water Code Chapter 7 contains the State ’ s statutory provi sio ns fo r enforcement of the Texas ERC program . In parti cular, TWC § 7.051 provides for the assessment of administrative penalties by the TCEQ, and § 7.032 provides for injunctive relief by the TCEQ . The TCEQ enf orcement rul e at 30 TAC § 70.5 inco rporates remedies fo und in the state statutes (Texas Water Code and the Texas Health and Safety Code), and permits referrals to EPA for civil, judicial or administrative action. It is our conclusion th at T CEQ has adequate legal authority to enforce th e ERC program revisions as part of th e SIP . Once we approve the revisions to the ERC program i nt o the SIP, EPA wi ll be able to enforce it under section 113 of the Clean Air Act.

The 40 CFR part 70, / CAA Titl e V operati ng permits program and the 40 CFR part 63, Nati onal Emission Standards for Hazardous Air Pollutants (NESHAPs) have been reviewed and found to have sufficient enforcement provisions. These same enforcement provisions will apply to the ERC Program. The Office of the Attorney General of the State of Texas has provided written opinions for these programs. The opinions state that TCEQ has the necessary legal authority to implement and enforce the programs. TCEQ has the authori ty to have reasonable re quirements for measuring and monitoring air emissions and to requi re owners and operators of sources to make and maintain records of the emissions.

The Office of the Attorney General of the State of Texas cited State laws and regulations th at regul ate, at a m

inimum, t he same sources as the Clean Air Act and do so with standards that are no less stringent than those specified by the CAA. The cited laws and regulations are: Texas Health and Safety Code Ann. sections 382.016 (Monitoring Requirements, Examinati on of Records), 382.021 (Sam

pling Methods and Procedures), 382.0514 (Sampling, Monitoring and Certification); 30 TAC sections 122.132 (Application and Required Information for Initial Permit Issuance, Reopening, Renewal, or General Operating Permits), 122.134 (Com plete Application), 122.136 (Application Deficiencies), 122.142 (Permit Content Requirements), 122.143 (General Terms and Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms and Conditions), 122.146 (Compliance C erti ficat io n Terms and Conditions), 122.165 (Certi ficat io n by Responsible Official; 30 TAC sections 101.8 (Sampling), 101.9 (Sam pling Ports).

Recordkeeping requirements specific to the ERC rule are set forth at § 101.302(g) . The At torney General has det ermined that TCEQ is allowed to prescribe sampling methods and procedures to be used to determ ine violations of and compliance with the TCEQ rules and orders. The ERC rul e provides that any use of monitoring protocols other than those specified in Chapter

115 and Chapte r 117 wi ll be approved by EPA ( § 101.302(d)(1) ). The rule al so specif

ies procedures i

n the event that monitoring and t esti ng data are unavailable at § 101.302(d) . The opi nio ns of the Texas Attorney General indicate that 27

### TCEQ has the necess ary l egal authority to implement and enforce the ERC program i n accordance with the requirements of the Clean Air Act.

EPA ’ s guidance on practicable enforceability (provided in the FDMS docket for thi s acti on) i s a series of agency memos on limiting pot ential to emit. While this guidance is not di rectl y applicable to an emissions trading program, the requirements for sufficient

mo nit ori ng do apply to the ERC program . The sources generating and certifying emission reducti ons as ECs m

ust be able to quant ify th e emission reduction over time. The ERC EIP s meet s EPA ’ s expectations on practicable enforceability by requiring sites to calculate emissio n reductions using an EPA approved protocol. Facilities subject to the control specifications in Chapters 115 and 117 must use the testing and monitoring methodologies identified to show compliance with the emission standards. If this monitoring or testing data i s unavailable or does not exist, the facility may report actual emissions for that period of time usi

ng the methods listed below in the following order of preference: Conti nuous monitoring data; 1. Peri odi c monitoring data; 2. Testi

ng data; 3. Manufacturer ’ s data; 4. Materi al balance. 5. A facilit y must submit justification to the TCEQ when not using the monitoring and testing protocol s in Chapters 115 and 117.

For the above reasons EPA has concluded that the ERC program meet s the Clean Air Act requirements and EPA EIP Guidance expectations for penalties, corrective action, and practi cable enforceability in the integrity element of enforceable. 28

### IV. A. Evaluation of the October 24, 2006 SIP Submittal

3. Evaluation of the October 24, 2006 Revisions to the Texas ERC Program with respect to the existing SIP-approved language and the EIP Guidance

The evaluation of the ERC program with respect to the EIP Guidance was conducted with

ourproposed approval

on October 5, 2005 (70 FR 58146 ) and final approval on Septem ber 6, 2006 (71 FR 52698). The October 24, 2006, rul e package currently under review in this TSD does not change the type of program or functionality of the ERC tradi ng program wit h respect to the EIP Gui dance. Therefore, t he evaluation of th e revisions to the ERC program at secti ons 101.302, 101.305, and 101.306 will include a line it em comparison of the federally approved ERC program and the S tate ’ s adopted revisions to dete rm

ine approvability. Approvability of each revision will be based on the EIP Gui dance and whether the measure strengthens the SIP. Note that thi s analysis will not reevaluate the portions of the ERC program that have not been revised since our final acti ons on Septem

ber 6, 2006.

Table IV-A3.1: Revisions to § 101.302

– General Provisions

Federally Approved Version September 6, 2006 71 FR 52698 Adopted State Language October 4, 2006 Rule Project Number 2005-054-101-PR Applicable pollutants. Reductions o f criteria (a) pollutants, excluding lead, or precursors of criteria pollutants for which an area is designated nonattainment, may qualify as emission credits. Reductions of one pollutant
may not be used to meet the requirements for another pollutant, unless : Applicable pollutants. Reductions of criteria (a) pollutants, excluding lead, or precursors of criteria pollutants for which an area is designated nonattainment, may qualify as emission credits. Reductions of one pollutant may

not be used to meet the
requirement s for another pollutant, unless urban airshed modeling demonstrates that

one ozone precursor may be substituted for another
, subject to executive director and the Un ited States Environmental Protection Agency (EPA) approval

. urban airshed modeling demonstrates that (1)

one ozone precursor may be substituted for another subject to executive director and Un ited States Environmental Protection Agency (EPA) approval ; or Moved to 101. 30 2(a)

the facility

generating the emission (2) reductions is located outsidethe United States and: International trading provisions have been m oved to 101.3 05, see discussion below

.

the substitution: (A) International trading provisions have been m oved to 101.3 05, see discussion below

. results in a greater health benefit (i) and is of equal or greater benefit to the overall air quality

of the area, as determined by

the executive director; International trading provisions have been m oved to 101.3 05, see discussion below

. 

### 29is from the reduction of an air (ii) contaminantfor which the area has been designated as nonattainment or which leads to the formation of a criteria pollutant for which an area has been designated as nonattainment; and International trading provisions have been m oved to 101.3 05, see discussion below

.

is for any air contami nantfor (iii) wh ich the area has been designated as nonattainment or leads to the formation of a criteria pollutant for which the area has been designated as nonattainment; and International trading provisions have been m oved to 101.3 05, see discussion below

.

the user: (B) International trading provisions have been m oved to 101.3 05, see discussion below

. demonstrates that the use of the (i) reduction does not cause localized health impacts, as determined by the executive director; International trading provisions have been m oved to 101.3 05, see discussion below

.

submits all supporting information (ii) for calculations and modeling, and
any additional information requested by the executive director; and International trading provisions have been m oved to 101.3 05, see discussion below

.

is located within 100 kilometers of (iii) the Texas - Mexico border. International trading provisions have been m oved to 101.3 05, see discussion below

. Eligible generator categories. The following (b) categories are eligible to generate emission credi ts : No change

f acilities
, including area sources; (1) No change mobile sources; and (2) No change
any facility, including area sources, or (3) mobile source associated with actions by federal agencies under §101.30 of this title (relating to Conformity

of General F ederal Actions to State Implementation Plans). No change

Emission credit requirements. (c) No change Emission reduction credits are certified (1) reductions that meet the following requirements : No change

r eduction s must be enforceable, (A) permanent, quantifiable, real and surplus; No change

the certified reduction must be (B) surplus at the time it is created, as well as when it is used; No change 

### 30in order to become certified, the (C) reduction must have occurred after the most recent y

ear of emissions inventory used in the state implementation plan (SIP); and No change

the facility

's annual emissions prior (D) to the reduction strategy must have been reported or represented in the emissions inventory

used for the SIP. No change

Mobile emission reduction credits are (2) certif ied reductions that meet the following requirements : No change

r eduction s must be enforceable, (A) permanent, quantifiable, real and surplus; No change

the certified reduction must be (B) surplus at the time it is created, as well as when it is used; No change

in order to become certified, the (C) reduction must have occurred after the most recent y

ear of emissions inventory used in SIP ; and No change

the mobile source ’ s annual (D) emissions prior to the emission credit application must have been represented in the emi ssions inventory used for the SIP; and No change

the mobile sources must have been (E) included in the attainment demonstration baseline emissions inventory

. No change

Emission reductions from a facility or (3) mobile source thatare certified as emission cred its under this division cannot be recertified in whole or in part as emission credits under another division within this subchapter. No change

Protocol. (d) No change All generators or users of emission credits (1) shall use a protocol which has been submitted by the executive director to the EPA for approval, if existing for the applicable facility or mobile source, to measure and calculate baseline emissions. If the generator or user wishes to deviate from a protocol submitted by the executive director, EPA ap proval is required before the protocol can be used. Protocols shall be used as follows. No change 

### 31Facilities subject to the emission (A) specifications under §§117.106, 117.206, or 117.475 of this title (relating to Emission Specifications for Attainment Dem onstrations; and Emission Specifications) shall quantify reductions in NO X emissions using the testing and monitoring methodologies identified to show compliance with the emission specification. No change

Facilities subject to the requirements (B) under §§115 .112, 115.121, 115.122, 115.162, 115.211, 115.212, 115.352, 115.421, 115.541, or 115.542 (relating to Emission Specifications; and Control Requirements) shall quantify VOC reductions using the testing and monitoring methodologies identified to show compliance with the emission specifications or the requirements. No Change

If the executive director has not (C) submitted a protocol for the applicable facility or mobile source to the EPA for approval, the following applies: No Change

the amount of emission credi ts (i) from a facility

or mobile source, in tons per y

ear , will be determined and certified based on quantification methodologies at least as stringent as the methods used to demonstrate compliance with any

applicable requirements for the facility or mobile source; No Change

the generator shall collect (ii) relevant data sufficient to characterize the facility ’ s or mobile source ’ s emissions of the affected pollutant and the facility ’ s or mobile source ’ s activity level for all representative phases of operation in order to characterize the facility ’ s or mobile source ’ s baseline emissions; No Change 

### 32facilities with continuous (iii) emissions monitoring systems or predictive emissions monitoring systems in place shall use this data in quantify

ing actual emissions; No Change

the chosen quantification (iv) protocol mustbe made available for public comment for a period of 30 days and mustbe viewable on the commission ’ s W eb site; No Change

the chosen quantification (v) protocol and any

comments received during the public comment peri od shall be submitted to the EPA for a 45- day adequacy review; and No Change

quantification protocols shall (vi) not be accepted for use with this division after a proposed disapproval of the protocol by the EPA in the Federal Register

. quantification protocol s shall not be (vi) accepted for use with this division if the executive director receives a letter objecting to the use of the protocol from the EPA during the 45-day adequacy review or the EPA proposes disapproval of the protocol in the Federal Register after a proposed disapproval of the protocol by the EPA in the Federal Register

. In the event that the monitoring and testing (2) data required under paragraph (1) of this subsection is missing or unavailable, the facility may report actual emissions for that peri od of time using these listed methods in the following order of preference to determine actual emissions: No Change

continuous monitoring data; (A) No Change periodic monitoring data; (B) No Change testing data; (C) No Change manufacturer ’ s data; (D) No Change EPA Co mpilation of Air Pollution (E) Emission Factors (AP-42), September 2000; or No Change

material balance. (F) No Change When quantify

ing actual emissions in (3) accordance with paragraph (2) of this subsection, the generator shall use the most conservative method for replacing the missing data, submit the justification for not using the methods in paragraph (1) of this subsection, and submit the justification for the method used. No Change

Credit certification. (e) No Change 

### 33The amount of emission credits in tons per (1)
year will be determined and certified, to the nearest tenth of a ton per y ear. No Change

Applications for certification will be (2) reviewed in order to determine the credibility of the reductions. Reductions determined to be creditable will be certified by theexecutive director. No Change

The applicant will be notified in writing if (3) the executive director denies the emission credit application

. The applicant may submit a revised application in accordance with the requirements of this division. No Change

If a facility ’ s or mobile source ’ s actual (4) emissions exceed its allowable emission limit, reductions of emissions exceeding the limit may not be certified as emission credits. No Change

Applications for certification of emission (5) credit from reductions quantif ied under subsection (d)(1)(C) of this section may only be approved upon completion of the public comment period. No Change

Geographic scope. Except as provided in (f) paragraph (3) of this subsection, only emission reductions generated in nonattainment area s can be certified

. An emission credit must be used in the nonattainment area in which it is generated unless the user has obtained prior

wr itten approval of the executive director and the EPA; and: Geographic scope. Except as provided in § (f) 101.305 of th is title (relating to Emission Reductions Achieved Outside the United States) paragraph (3) of this subsection , only emission reductions generated in nonattainment areas can be certified

. An emission credit must be used in the nonattainment area in which it is generated unless the user has obtained prior written approval of the executive director and the EPA; and a demonstration has been made and (1) approved by the executive director and the EPA to show that the emission reductions achieved in another countr y, state, or nation provide an improvement to the air quality in the county

of use; or No Change

the emission credit was generated in a (2) nonattainment area that has an equal or higher nonattainment classification than the nonattainment area of use, and a d emonstration has been made and approved by the executive director and the EPA to show that the emissions from the nonattainment area where the emission credit is generated contribute to a violation of the national ambient air quality standard in the nonatt ainment area of use; or the emission credit was generated in a (2) nonattainment area that has an equal or higher nonattainment classification than the nonattainment area of use, and a demonstration has been made and approved by the executive director and the EPA to show that the emissions from the nonattainment area where the emission credit is generated contribute to a violation of the national ambient air quality standard in the nonattainment area of use

. ; or 

### 34a facility is using emission reductions (3) generat ed outside the United States that have been determined by the executive director to be real, permanent, enforceable, quantifiable, and surplus to any applicable international, federal, state, or local law and the result would provide a greater health benef

it to the area as determined by the executive director; and the facility : International trading provisions have been m oved to 101.3 05, see discussion below

.

demonstrate s that the use of the (A) reduction does not cause localized health impacts, as determined by the executive director; International trading provisions have been m oved to 101.3 05, see discussion below

.

submit s all supporting information (B) for calculations and modeling, and
any additional information requested by the executive director; and Interna tional trading provisions have been m oved to 101. 305, see discussion below

.

be located within 100 kilometers of (C) the Texas - Mexico border. International trading provisions have been m oved to 101. 305, see discussion below

. Recordkeeping. The generator sh all maintain a (g) copy of all notices and backup information submitted to the registry

for a minimum of five years. The user shall maintain a copy of all notices and backup information submitted to the credit registry

from the beginning of the use period and

for at least five years after. The user shall also make such records available upon request to representatives of the executive director, EPA, and any

local enforcement
agency . The records must include, but not necessarily

be limited to: No Change

the name, emission point number, and (1) facility

identification number of each facility or any other identifying number for each mobile source using emission credits; No Change

the amount of emission credits being used (2) by each facility or mobile source; and No C hange

the specific number, name, or other (3) identification of emission credits used for each facility

or mobile source. No Change 

### 35Public information. All information submitted

(h) with notices, reports, and trades regarding the nature, quantity, and sales pri ce of emissions associated with the use, generation, and transfer of an emission credit is public information and
may not be submitted as confidential. Any claim of confidentiality

for this ty

pe of information, or failure to submit all information
may res ult in the rejection of the emission credit application. All nonconfidential notices and information regarding the generation, availability, use, and transfer of emission credits shall be immediately made available to the public. No Change

Authorization to emit. An emission credit (i) created under this division is a limited authorization to emit the pollutants identified in subsection (a) of this section, unless otherwise defined, in accordance with the provisions of this section, 42 USC §§ 7401, the Texas Health and Safety

Code Chapter 382, as well as regulations promulgated thereunder. An emission credit does not constitute a property right. Nothing in this division may be construed to limit the authority of the commission or the EPA to terminate or limi t such authorization. No Change

Program participation. The executive director (j) has the authority

to prohibit an organization from participating in emission credit trading either as a generator or user, if the executive director determines that the organiz ation has violated the requirements of the program or abused the privileges provided by the program. No Change

Compliance burden and enforcement. Users (k)
may not transfer their compliance burden and legal responsibilities to a third-party participant. Third-party

participants may

only act in an advisory

capacity to the user. No Change

Credit ownership. The owner of the initial (l) emission credit certificate shall be the owner or operator of the facility

or mobile source creating the emission reduction. Theexecutive director
may approve a deviation from this subsection considering factors such as, but not limited to: No Change

wh ether an entity

other than the owner or (1) operator of the facility or mobile source incurred the cost of the emission reduction
str ategy ; or No Change

wh ether the owner or operator of the (2) facility

or mobile source lacks the potential to generate 1/10 ton of credit. No Change 

### 36

### TCEQ revised section 101.302 by moving the international trading provisions to new

section 101.305 in response to EPA ’ s Septem ber 6, 2006 conditional approval of the DERC program ; in our conditional approval we recommended restructuring the rules to

mo re clearly identify the international provisions. The revisions to the protocol provisions at 101.302(d)(1)(C)(vi) were al so made in response to EPA ’ s conditional approval of the DERC program ; in our conditional approval we recommended revisions to more clea rl y align the Texas ERC program with the EIP Guidance Section 5.2(c). The revisions to 101.302 are approvable.

Table IV-A3.2: New§ 101.3 05 – Emission Reductions Achieved Outside the United States

Adopted State Language October 4, 2006 Rule Project Num ber 2005-054-101-PR A facility may use reductions achieved outside the United States of criteria pollutants or precursors of (a) criteria pollutants if the facility meets the requirements of subsection (c) of this section. A facility may use reductions achie ved outside the United States of criteria pollutants or precursors of (b) criteria pollutants and substitute these reductions for reductions in other criteria pollutants or precursors of criteria pollutants if the facility meets the requirements of subsection (c) of this section; and the reduction is substituted for the reduction of another criteria pollutant and the substitution (1) results in a greater health benefit and is of equal or greater benefit to the overall air quality of the
area; or a reduction of an air contaminant for which the area in which the facility is located has been (2) designated as nonattainment or which leads to the formation of a criteria pollutant for which an area has been designated as nonattainment is substituted for any air contaminant for which the area has been designated as nonattainment or leads to the formation of any criteria pollutant for wh ich the area has been designated as nonattainment. The use of reductions outside the United States must be approved by the executive directorand the (c) Un ited States Environmental Protection Agency (EPA), and the user of the emission reduction must: demonstrate to the executive director and EPA that the reduction is real, permanent, enforceable, (1) quantifiable, and surplus to any applicable Mexican, federal, state, or local law; demonstrate that the use of the reduction does not cause localized health impacts, as determined (2) by the executive director and EPA; submit all supporting information for calculations and modeling, and any additional infor mation (3) requested by the executive director and EPA; and be located within 100 kilometers of the Texas-Mexico border. (4) This section does not apply to reductions in emissions of lead. (d)



### TCEQ created new section 101.305 in response to EPA ’ s conditional appro val of the DERC rule in which we requested more clarity th at EPA approval is required fo r the int ernational trading provisions. EPA approved international reduction language on Septem be r 6, 20 06 i

n our ori ginal ERC approval. At that ti me, s ecti on 101.302 (a)( 2 ) established requirements for substituting one pollutant for another and section 101.302(f) provided the geographic restrictions for using international emission reductions. The 37

### October 2 4, 2006 revisions to the ERC program moved the international p rovi sio ns to

new section 101.305 and changed an “ and ” statement to an “ or ” statement . While EPA supports the new section for international trading provisions, th e revised language has the potenti al to change the underlying basis of the ERC program and the ori ginal int ent of EPA ’ s approval.

New s ecti on 101.305 does not provi de that a reducti on i n Mexico will be certified as an ERC in the TCEQ Emissions Bank, inst ead the reducti ons in Mexico would be used by a Texas source in lieuof

an ERC. Revised sectio n 101.302(f) states that
, wi th the exception of the reducti ons under section 101.305, the reductions certified as ERCs must be used in th e nonattai

nment area of generation or receive prior approval by the TCEQ and EPA. Secti on 101.305 does not i nclude any

restri cti on that requi

res the reducti on from Mexico to be used i

n a nonattainment area. Rather, section 101.305(c)(4) only requires the US facilit y to be wi

thin 100 kilometers of the Texas-Mexico border. Therefore, Mexican reducti ons that are not certi f iable as ERCs can be used anywhere within 100km of the border regardless of the attainment status in the Unit ed S tates . The previous international emissio ns reducti on l anguage approved by EPA on Septem ber 6
, 2006 ( 71 FR 52698)
, limit ed the use of internat io nal r educti ons to Texas nonattai nment areas within 100km of th e border

–

at the ti me of our approval, the El Paso area was the only nonattainment area. Limit ing the use of ERCs or international reductions in lieu of ERCs to nonattainment areas was in ke eping with the intent of our original ERC approval which was to provide flexibilit y to sources i

n nonattainment areas.

EPA com ment ed on May

30, 2006, that thi s new section 101.305 appeared to expand the ERC rule beyond its intended scope and could pose section 110(l) concerns because it was outsi de of our original approval of the ERC program. TCEQ ’ s response to com ment s o n this rulemaking states “ If as expected, El Paso is reclassified as an attainment area, the adopted rul e change will allow beneficial emission reduction substitutions to continue as a result of reductions achieved in Ciudad Juarez without relating those e missio n red u cti ons to the attai

nment status of El

Paso. ”

EPA finds that new section 101.305 has expanded the scope of our original ERC program approval because it does allow the use of international reductions in lieu of ERCs to occur in attainment areas wit hin 100-km of the Texas-Mexico border

. However the continued requirement at section 101.305 for EPA approval before any such use is consistent with th e i nt ent of our ERC program approval on September 6, 2006. EPA approval continues
to be through a cas e-specific SIP revision that must clearly demonstrate through a detailed 110(l) analysis that the use of such int ernational reducti ons will not jeopardize attainment

or maint enance of the NAAQS or any other applicable standards. As noted in our Septem ber 6, 2006, final approval of the ERC Program “... int ernational trades present an especially difficult case. For i nstance, currently there is no approvable mechanism for demonstrating that reductions made in another country are surplus or enforceable. Nonethe less, emission reductions in other countries could potentially offer substantial air quality benefits in the United States. ” See 71 FR 52698, 52699. In approving this revision 38

### to the ERC program , EPA i s conti nuing to recognize “th e concept of internationa l tradi ng and describing a framework (i.e., the submission of a SIP revision demonstrating among oth er thi ngs the validity and enforceability of foreign reductions) for such trading, in the event that a suitable and approvable mechanism is ever developed f or resol ving concerns including enforceability and surplus. Until such a mechanism is developed and approved by EPA, however, EPA will not approve international trades under the ERC rul e.” See 71 FR 52698, 52699. Further, it is important to note, that ev en though we are approving the use of international reducti ons i n lieu of ERCs along the Texas-Mexico border, the use of th ese reductions must still meet the requirements of the CAA. Therefore, the international reducti ons are not available for use as fed eral NSR offsets since section 173(c)(1) of the CAA requires that offset reductions come from the same nonattainment area as the proposed source or modi ficat io n or another nonattai nment area with an equal or higher nonattai nment cl assification.

In additio n to the expansion of scope concern highlighted previously, EPA also made several other comments regarding new section 101.305 in our May 30, 2006
, com ment let ter. These additional comments suggested alternate wording and requested clarification from TCEQ . The TCEQ adequatel y addressed these comments and revised the propose d section accordingly.

The provisions at new section 101.305 are approvable with the caveats specified above for EPA approval of any trades involving international emission reductions.

Table IV-A3.3: Revisions to § 101.306

– Emission Credit Use

Federally Approved Version September 6, 2006 71 FR 52698 Adopted State Language October 4, 2006 Rule Project Number 2005-054-101-PR Uses for emission credits. Unless precluded by (a) a commission order or a condition or conditions within an authorization under the same commission account number, emission credits
may be used as the following: No change

offsets for a new source, as defined in § (1) 101.1 of this title or major modification to an exist ing source; No change

mitigation offsets for action by federal (2) agencies under § 101.30 of this title; No change

an alternative means of compliance with (3) VOC and NO Xreduction requirements to the extent allowed in Chapters 114, 115, and 117 of this title; No change 

### 39reductions certified as emission credits may (4) be used in netting by the original applicant, if not used, sold, reserved for use, or otherwise relied upon, as provided in § 116.150 of this title; No change

an annual allocation of allowances as (5)
pr ovided in § 101.356 of this title; an annual allocation of allowances as (5) provided in § 101.356 and § 101.399 of this title; compliance with motor vehicle fleet (6) requirements to the extent allowed by § 114.201 of this title; No change

compliance with other requirements as (7) allowable within the guidelines of local, state, and federal laws. No change

Credit use calculation. (b) No change The number of emission credits needed by (1) the user for offsets shall be determined as provided in § 116.150 of this title. No c hange

For emission credits used in compliance (2) with Chapter 114, 115, or 117 of this title, the number of emission credits needed should be determined according to the following equation plus an additional 10% to be retired as an environmental contribution

. Figure: 30 TAC § 101.306(b)(2) No change

For emission credits used to comply with (3) §§ 117.108, 117.210, or 117.223 of this title, the number of emission credits needed for increasing the 30-day rolling average cap or maximum daily

cap should be determin ed according to the following equation plus an additional 10% to be retired as an environmental contribution. Figure: 30 TAC § 101.306(b)(3) No change

Emission credits used for compliance with (4)
any other applicable program should be determined in accordan ce with the requirements of that program and must contain at least 10% extra to be retired as an environmental contribution, unless otherwise specified by that program. No change

Notice of intent to use emission credits. (c) No change 

### 40For emission credits wh ich are to be used (1) as offsets in a New Source Review permit in accordance with Chapter 116 of this title, the emission credits must be identified prior to permit issuance. Prior to construction, the offsets must be provided through submittal of a complete d EC-3 Form, Notice of Intent to Use Emission Credits, along with the original emission credit certificate. No change

For emission credits that are to be used for (2) compliance with the requirements of Chapter 114, 115, or 117 of this title or other programs , the user must submit a completed EC-3 Form along with the

or iginal emission credit certificate, at least 90 days prior to the planned use of the emission credit. Emission credits may be used only after the executive director grants approval of the notic e of intent to use. The user must also keep a copy of the emission credit certificate, the notice, and all backup in accordance with § 101.302(g) of this title. No change

If the executive director denies the facility (3)

or mobile source ’ s use of emission cr edits,
any affected person by the executive director ’ s decision may

file a motion for reconsideration within 60 days of the denial. Notwithstanding the applicability provisions of § 50.31(c)(7) of this title, the requirements of § 50.39 of this title shal l apply . Only

an affected person may

file a motion for reconsideration. No change



### The revisions to section 101.306(a)(5) update the list of acceptable ERC uses to include ERCs for use in the Highly-Reactive Volatile Organic Compound Emissions Cap and Trade Program

at 30 TAC Chapter 101, Subchapter H, Division 6, Section 101.399, per TCEQ ’ s com

mit ment s in the September 8 , 2005
, l etter to EPA. The revi sio ns to secti on 101.306 are approvable. 41

### IV. A. Evaluation of the October 24, 2006 SIP Submittal

4. Evaluation of the October 24, 2006 SIP Submittal with respect to section 110(l) of the CAA

Secti on 110(l) of

the Clean Air Act states:

Each revision to an implementation plan submitted by a State under this Act shall be adopted by such State after reasonable notice and public hearing. The Administrator shall not ap prove a revision of a plan if the revision w ould interfere with any applicable requirement concerning attainment and reasonable further progress (as defined in section 171), or any other applicable requirement of this Act.

Thus, under section 110(l), this SIP revision must not interfere with attainment or reasonable further progress or any other applicable requirement of the Act.

Because this analysis only focuses on the revisions to sections 101.302, 101.305 and 101.306 of the ERC program , thi s 110(l) analysis will also only focus on these pieces of th e October 24, 2006 SIP revi sio n. The revisions to section 101.302 will not interfere wit h attai nment , reasonable further progress or any other applicable requirement of the Act because the revisions rem oved opti onal provisions for international reductions and clarified the already SIP-approved procedure to use an emission quantification protocol. The revisions to section 101.306 will also not int erfere wi th attai nment , reasonable further
progress or any

other applicable requirement of the Act because this section has been revised to update the ERC usage list to include the SIP-approved option of using ERCs as allo wances in the HECT program. The revisions to section 101.305 could possibly int erfere with attai

nment , reasonable further progress or any other applicable requirement of the Act because these revisions expand the use of international reductions to any lo cati on within 100-km of the Texas-Mexico border, rather than consolidating the use of int ernati onal reductions to nonattainment areas within 100-km of the Texas-Mexico border. However, any use of international reductions in lieu of ERCs as specified in section 101.305 is subject to EPA approval. Our approval will be through a case-specific SIP r evisio n and based on a thorough section 110(l) demonstration from the TCEQ or the source that demonstrates the use of international reductions does not interfere with attai nment , reasonable further progress, or any other applicable requirement of the Act. 42

### IV. B. Evaluation of the August 16 , 2007 SIP Submittal

1. Evaluation of the August 16, 2007 , SIP submittal with respect to the Part 51, Appendix V Completeness Checklist

Part 51, Appendix V Completeness Checklists

The criteria fo r com

pleteness determ

inat io n is Appendix V to Part 51 - Criteria for determ ining the completeness of plan submissions and is outlined below:

1.0 Purpose: Thi s appendix V sets forth the minimum criteria for determining whether

a State implement ati on plan submit ted fo r consid erati on by EPA is an of ficial submissio n for purposes of review under § 51.103.

1.1 The EPA shall return to th e submit ti ng of ficial any plan or revision th ereof which fails to meet the cri

teri a set f orth i n this appendix V, and request correcti ve acti on , identifying th e com

ponent(s) absent or insufficient t o perform a review of t he submit ted pl an.

1.2 The EPA shall info rm t he submit ti

ng of ficial whether or not a plan submissio n meets th e requirements of t his appendix V wit hin 60 days of E PA's receipt of

t he submit tal , but no l ater than 6 months after the date which the State was required to submit t he plan or revision. I f a com pleteness determ

inat io n is not made by 6

mo nt hs from receipt of

a s ubmit tal
, th e submit tal s hall be deemed com

plete by operati on o f law on th e date 6 mo nt hs from receipt. A d eterm inat io n of

com pleteness under this paragraph means th at th e submissio n is an of ficial submissio n for purposes of §51.103.

The attached checklist outlines th e basic criteria included under 2.1 and 2.2 of A ppendix V.

Secti on 2.3 of

A ppendix V describes th e "parallel process procedure" which EPA had previously adopted to expedite th e review of p lans. T his feature, however, is being deleted from th e next revised CFR on com pleteness. T herefore, it i s not included in th e checklist. 43

### SIP Completeness Checklistfor the August 16, 2007 SIP Submittal

Rule Log No: 200 6 -0 5 3-1 01

- PR

When preparing a SIP revision request, the SIP re viewer should go through this list to help identify that the package submitted to EPA is complete. States can use the check list to assure SIP subm

it tal s meet Appendix V criteria.

Administ rati

ve Materials (2.1)

1. The package is sent with a formal submi ttal l etter f rom the Governor or hi s or her designee requesting EPA's approval of the revision.

The SIP revision w

as submitted by a letter from Kathleen Hartnett White, Chairman of the Texas Commission on Environmental Quality, dated August 16, 2007. Gov ernor Rick Perry designated that the Chairman of the Texas Commission on Environmental Quality w ould be his designee for SIP submittals in a letter dated May 21, 2002.

2. Evidence is included that the State has adopted the revision in the State code or bo dy of regulations, or that the State has issued the permit, order, consent agreement (hereafter document) in final form. This evidence would include the date of adopti on or f

inal issuance and the effective date of revision, if different from adoption/issu ance date.

The revisions w

ere adopted by the Texas Commission on Environmental Quality

on July 25, 2007

, and became effective August 10, 2007

.

3. Evidence is included that the State has necessary legal authority under State law to adopt and i

mplement the revision, e.g., a citation of the appropriate State authori ty

. The authority for promulgating changes to the Texas State Implementation Plan, Chapter 101, Subchapter A

– General Rules; Subchapter H

– Emissions Banking and Trading is found in Chapter 38 2 of the Texas Health and Safety Code.

4. A copy

i s included of the actual regulation or document submitted for approval and incorporation by reference into the SIP including an indication of the changes made to the existing approved plan where applicable . The submittal shall be a
copy of the official State regulation document signed, stamped, and dated by the appropri ate State of

ficial indicat ing that it is fully enforceable by the State. The effective date of the regulation document shall, whenever pos sible, be indicated in th e document itself. 44

### The August 16, 2007, submittal included a copy of the official State regulation document, signed, stamped, and dated by Kathleen Hartnett White, Chairman of the Texas Natural Resource Conservation Commission.

5. Evidence is included that the State followed all the procedural requirements of its laws and/or its constitution in the conducting and completing the adopti on/issuance of the plan.

The authority for promulgating changes to the Texas State Implementa tion Plan is found in the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code.

6. Evidence is included that public notice was given of the proposed changes consistent with the procedures approved by EPA, including the date of publication of such notice, (e.g., notarized or certified copies of any public notices published in newspapers). (The notice should be at least 30 days prior to the public hearing(s).

Notices of public hearing w ere published on February 12, 2007, in the Austin Ameri can Statesman, the Fort Worth Star-Telegram, and the Houston Chronicle.

7. A certification is included indicating that public hearing(s) was/were held in accordance with the information provided in the public notice(s) and the State's laws and constitutio n, if applicable.

The order adopting the new , amended, and repealed sections to 30 TAC Chapter 101 provided evidence that the public hearing w as conducted pursuant to Texas Health and Safety Code § 382.017 and 40 CFR § 51.102.

8. A compilation of public com ment s and the State's response is included.

The SIP submittal package did include a compilation of public comments and the State ’ s responses. The TCEQ received w ritten comments from EPA Region 6 and Michelle Bonilla, a public citizen w ith Eternal Springs Wellness.

Technical Support (2.2)

The State should i

nclude the following technical information in its SIP revision request package.

1. Identification of all regulated pollutants affected by the revision is included.

This SIP revision repeals an effective date established in Chapter 101, Subchap ter A

. This section has no applicable regulated pollutants. 45

### Chapter 101, Subchapter H, Division 1 (ERC Program) applies to criteria pollutants, and precursors, for w hich an area is designated nonattianment with the exception of lead. Chapter 101, Subcha pter H, Division 3 (MECT Program) applies to NO

X 

### emissions . Chapter 101, Subchapter H, Division 4 (DERC Program) applies to criteria pollutants, and precursors, w ith the exception of lead. Chapter 101, Subchapter H, Division 5 (SCT Program) applies to NO X 

### emissions. How

ever, the SIP revision under review does not change the applicability of these programsand therefore does not need to restate the list of regulated pollutants that w ere submitted as part of the original SIP submittals establishing each program.

2. Identification of the locations of affected sources including the EPA attai nment /nonattai

nment designation of the locations and the status of the attai nment pl an for the affected area(s) is included.

The revisions to Chapter 101, Subchapter A a pply statewide. The revisions to the ERC program at Chapter 101, Subchapter H, Division 1 apply to all nonattainment areas statewide. The revisions to the MECT program at Chapter 101, Subchapter H, Division 3 apply only to facilities in the Houston/Galveston/Brazoria ozone nonattainment

area. The revisions to the DERC program at Chapter 101, Subchapter H, Division 4 apply statewide. The revisions to the SCT program at Chapter 101, Subchapter H, Division 5 apply to nonattainment areas statewide and areas with unique emission limits established in Chapter 117.

3. Quantification of the changes in SIP allowable emissions from the affected sources is included. (Examples include estimates of changes in current actual emissions from affected sources and/or, whe re appropri ate, quanti ficat io n of changes in actual emissions from affected sources through calculations of the differences between certain baseline levels and allowable emissions anticipated if the revisions were approved.)

Quantification of the changesin SIP allow able emissions from the affected sources is not applicable to this SIP revision.

4. Demonstration is included that the NAAQS/PSD increments/RFP demonstration and visibilit y as applicable would be protected if the revision were approved and implement ed.

The SIP submittal does not include revisions to the PSD and NSR permitting
programs. 46

### 5. FOR REDESIGNATIONS:

a. Is there a fully approved maintenance plan for the primary ambient air quality standards for at least 10 years as required by § 175A of the Clean Air Act?

Not applicable.

b. Are contingency measures included?

Not applicable.

Modeling information, if applicable, is required to support the propose revision. 7.

Modeling information is not necessary to support the SIP revisi on.

7. Evidence is included where necessary, that emission limitations are based on conti nuous emission reduction technology (e.g., add-on controls, industrial/process equipment designs, reformulated materials, etc.).

Evidence of emission limitations ba sed on CEM technology is not applicable.

8. Evidence is included indicating that a SIP revision contains emission limitations, work practi ce standards, and recordkeeping/reporting requirements to ensure stated em issio n levels.

Not applicable. Enforceabi lity is determined on case-by-case basis in each individual permit.

9. Com

pliance/enforcement strategies including how compliance will be determined in practice (including at what frequency).

Not applicable. Determination of compliance is specified on case-by-case basis in each individual permit.

10. As appropriate, special economic and technological justifications are included per applicable EPA policies or an explanation why such justifications are not necessary should be included. For example, requests for alternative RACT may require such jus ti ficat io n.
These justifications are not necessary for this SIP revision. 47

### The SIP submittal of Rule Log No.: 2006-053-101-AI meets the completeness

criteria. 48

### IV. B. Evaluation of the August 16 , 2007 SIP Submittal

2. Evaluation of the August 16, 2007 , SIP submittal with respect to the requirements of 40 CFR Part 51

Requirements for the preparation, adoption, and submittal of implementation plans can be fo und in 40 CFR Part 51. The August 16, 2007 proposed ERC revisions were evaluated against the applicable requirements in Part 51. This analysis is included in Table IV- B2 belo w. The revisions to the DERC and SCT program also submitted on August 16, 2007, as revisions to the SIP are not included in the analysis below. The DERC and SCT
program revisio ns will be acted on separately by EPA at a later date. The revisions to the General Air Quality Rules and the MECT program were evaluated in EPA ’ s July 16, 2009 direct final approval (see 74 FR 34503).

Table I V-B2 : Analysis of Part 51 Requirements

Part 51 – Requirements for Preparation, Adoption, and Submittal of Implementation

Plans ERC Program Revisions 30 TAC §§ 101.302 and 101.306

Subpart A

–

Emission Inventory

Reporting Requirements The revisions to sections 101.302 and 101.306 update cross-refere nces in the ERC program and are not concerned with emissions inventory reporting, nor do they

modify current emissions inventory reporting requirements for TCEQ. Subparts B

–

E [Reserved] Not applicable. Subpart F

–

Procedural Requirements Subpart F

– Pr ocedural Requirements § 51.100 Definitions § 51.100 is not applicable to the Chapter 101 sections under review in this TSD. 51.100 establishes definitions used elsewhere in 40 CFR Part 51. § 51.101 Stipulations § 51.101 is not applicable to the Chap ter 101 sections under review in this TSD. 51.101 establishes the stipulations that govern the use/intent of 40 CFR Part 51. 

### 49§ 51.102 Public Hearings States must conduct one or more public  hearings Public hearings will only be held after  reasonable noti ce, given at least 30 days prior to the date of the hearing The state must submit with the revision a  certification that the hearing was held in accordance with this section. Rule Log Number 2006-053-101-PR TCEQ held a public hearing on this rule  package i n Austin, Texas on March 20, 2007. The public hearing was held after reasonable  notice was given. TCEQ published notice of the public hearing in the following newspapers on the dates listed below for this rule package: Austin American Statesman

– February 12,  2007; Fort Worth Star Telegram

– February 12,  2007; Houston Chronicle

–

February 12, 2007.  The SIP submittal included certification that  the public hearing was held in accordance with Texas Health and Safety Code § 382.017 and 40 CFR 51.102. § 51.103 Submission of plans, preliminary review of plans The state makes an official plan  submission to EPA only when the submission conforms to the requirements of Part 51, Appendix V. The state delivers 5 copies of the plan with  a letter giving notice of the a ction to the EPA regional office. Please see Section IV. B.1. of this document for the completed Appendix V checklists for the rule package.

The rule package meets the requirements for completeness.

§ 51.104 Revisions States may

revise the plan from ti me to  time EPA will approve revisions only after  appropriate public hearing requirements have been met Revisions must be submitted in accordance  with 51.103 Kathleen Hartnett White submitted the Chapter 101 revisions as SIP revisions on August 16, 2007.

S ubpart G

–

Control Strategy Subpart G

– Control Strategy § 51.110 Attainment and Maintenance of National Standards Requirements found in § 51.110 are not applicable to the SIP submittal under review in this document.

The revisions to sections 101.302 and 101.306 update the ERC program to appropriatelycrossreference the recodification of the Chapter 117 requirements and do not changethe functionality of the ERC program.

The ERC program is a discretionary EIP that provides for the voluntary generation and use of emission reduction credits. The ERC program is not an integral control strategy in any of the Texas Attainment Demonstrations. However, EPA expects the TCEQ to account for the generation and use of ECs in all attainment demonstrations. 

### 50§ 51 .111 Description of Control Measures Requirements found in § 51.110 are not applicable to the SIP submittal under review in this document. The ERC program does not establish control strategies for Texas, rather the program provides for the voluntary

gene ration and use of ECs. § 51.112 Demonstration of Adequacy Requirements found in § 51.112 are not applicable to the SIP submittal under review in this document. Since the ERC program is not an integral piece of an attainment strategy, it is not necessary that the ERC program demonstrate adequacy for maintaining a national standard. § 51.113 Reserved Not applicable. § 51.114 Emissions Data and Projections Requirements found in § 51.114 are not applicable to the SIP submittal under review in this docume nt. As the ERC program is not part of an attainment demonstration, the ERC program SIP revision does not need to provide a detailed emission inventory and summary

of projected emission levels after the implementation of control strategies. However, the ERC program does require that generators and users submit applications to the TCEQ that estimate and verify the emission reductions that are generated and/or used. § 51.115 Air Quality

Data and Projections Requirements found in § 51.115 are not applicable to the SIP submittal under review in this document. The ERC program is not part of an attainment plan, therefore it is not necessary that the ERC a revision SIP submittal includes data on existing air quality or summarize expected air quality impacts fromthe implementation of control strategies. § 51.116 Data Availability

The State must make available to the public all data and calculations used in the preparation of each plan or plan revision.

Each plan must provide for public availability of emission data reported by source owners or operators. TheTCEQ provided the public the opportunity to participate in stakeholder meetings in the rulemaking development process, and the public received comment periods on the proposed plan.

The Texas Clean Air Act , Texas Health and Safety Code at Section 382.040 requires that all information submitted to the TCEQ for compliance purposes be made available to the public, unless a

wr itten request for nondisclosure is approved. § 51.117 Additional provisions for le ad Lead r equirements found in § 51.117 are not applicable to the ERC program

. The ERC program does not apply to lead emissions. § 51.118 Stack Height Provisions Requirements found in § 51.118 are not applicable to the SIP submittal under review in this document. The ERC program is a discretionary program for voluntary generation and use of ECs and does not involve good engineering practices for stack heights. 

### 51§ 51.119 Intermittent Control Systems Requirements found in § 51.119 are not applicable to th e SIP submittal under review in this document. The ERC program is a discretionary program for voluntary generation and use of ECs and does not require intermittent control systems. § 51.120 Requirements for State Implementation Plan Revisions relating t o Motor Vehicles Requirements found in § 51.120 are not applicable to the SIP submittal under review in this document. The ERC program does provide for the generation and use of mobile emission reductions, but that is not related to the part 51 requiremen ts for SIP revisions relating to motor vehicles. § 51.121 Findings and requirements for submission of State Implementation Plan Revisions relating to emissions of oxides of nitrogen Requirements found in § 51.121 are not applicable to the SIP submittal under review in this document. § 51.121 establishes the requirements for the NO X SIP Call; Texas was not subject to the NO X SIP Call. § 51.122 Emissions reporting requirements for SIP revisions relating to budgets for NO Xemissions. Requirements found in § 51.122 are not applicable to the SIP submittal under review in this document. § 51.122 establishes the emission reporting requirements for the NO XSIP Call; Texas was not subject to the NO XSIP Call. § 51.123 Findings and requirements for submission o f State Implementation Plan Revisions relating to Emissions of Oxides of Nitrogen pursuant to the Clean Air Interstate Rule Requirements found in § 51.12 3 are not applicable to the SIP submittal under review in this document. § 51.12 3 establishes the requirements for the NO X Annual and Ozone season programs for the Clean Air Interstate Rule (CAIR). § 51.124 Findings and requirements for submission of State Implementation Plan Revisions relating to Emissions of Sulfur Dioxide pursuant to the Clean Air In terstate Rule Requirements found in § 51.124 are not applicable to the SIP submittal under review in this document. § 51.124 establishes the program requirements for the CAIR SO 2 Programs. § 51.125 Emissions reporting requirements for SIP revisions relat ing to budgets for SO 2 and NO X emissions. Requirements found in § 51.12 5 are not applicable to the SIP submittal under review in this document. § 51.12 5 establishes the emission reporting requirements for the CAIR NO Xand SO 2 trading
programs. Subpart H

–

Prevention of Air Pollution Emergency Episodes Requirements found in 51, Subpart H are not applicable to the SIP submittal under review in this document. The ERC program is a discretionary program for the generation and use of ECs and is not part of th e Texas air pollution emergency episode plan. 

### 52Subpart I

– Review of New Sources and Modifications § 101.306(a)(1) provides that ECs can be used as NSR permit offsets. § 101.306(a)(4) provides that ECs may be used for NSR netting by

the original applicant if not used, sold, reserved for use, or otherwise relied upon as provided in § 116.150.

EPA reviewed the use of ERCs and MERCs as NSR offsets and netting as part of our approval of the program, and found these provisions of the ERC program to meet the NSR offset requirements of section 173 of the CAA and 51.165. The revisions to the ERC program submitted in this SIP submittal do not revise § 101.306(a)(1) or (a)(4). Subpart J

–

Ambient Air Quality

Surveillance Requirements found in 51, Subpart J are not

applicable to the SIP submittal under review in this document. Ambient air quality surveillance is not part of the ERC program. Subpart K

–

Source Surveillance Subpart K

– Source Surveillance § 51.210 Each plan must provide for monitoring the status of

compliance with rules and regulations that set forth any

portion of the control strategy

. The Texas ERC program was developed and submitted in accordance with the Texas Health and Safety Code. Texas enforcement provisions are not ty pically in the State ’s individual rules but are separately codified. Texas Water Code Chapter 7 contains the State ’ s statutory provisions for enforcement of programs developed according to the Texas Health and Safety Code; i.e, the Texas ERC program . Section 382.111 of the Te xas Health and Safety

Code provides the ability to enter and periodically

inspect stationary

sources. Section 382.021 establishes that the Texas Commission on Environmental Quality

can determine the necessary sampling and detection methods used to demonstrate compliance with an emission limitation. § 5 1.211 The plan must provide for l egally enforceable procedures for r equiring stationary

sources to maintain records and report the following to the State: Information on the nature and amount of  emissions from the stationary source; and Other information as necessary for the State to  determine wh ether the sources are in compliance. § 51.212 The plan must provide for periodic testing and inspection of stationary sources. Additionally
, the plan must establ ish a system for detecting violations and include enforceable test methods. § 51.213 The plan must contain procedures for obtaining and maintaining data on actual emissions reductions achieved as a result of implementing transportation control measures. § 51.213 is not applicable to the ERC program. While the ERC program does provide for the generation and use of mobile emission reductions, these reductions must be surplus to transportation control measures in the SIP. § 51.214 The plan must contain leg ally enforceable procedures to require stationary sources subject to emission standards as part of the applicable plan to install, calibrate, maintain, and operate continuous emission monitoring systems. The ERC program does not establish emission standard s under the Texas SIP that would mandate the installation or use of continuous emission monitoring systems. However, section 101.302(d)(2) provides the quantification procedures for ECs, and continuous monitoring data is an acceptable data source for actu al emissions data in the event that the SIP approved testing and monitoring methods in Chapter 115 and Chapter 117 are not available. Subpart L

–

Legal Authority Subpart L

– Legal Authority 

### 53§ 51.230 Each plan must show that the State has

the necessary

le gal authority

to carry out the plan, including the authority

to adopt emission standards and limitations necessary for attainment of the NAAQS, enforce applicable laws and regulations and seek injunctive relief. The ERC program was developed and submitted in accordance with the Texas Clean Air Act, Chapter 382 of the Texas Health and Safety Code. The Texas Health and Safety Code and the enforcement provisions in the Texas Water Code provide TCEQ the necessary

legal authority

to implement the SIP. A more d etailed discussion immediately follows this table.

§ 51.231 The provision of law or regulation which the State determines provides the authorities required must be specifically identified and copies must be submitted with the plan. Texas identified in the submittal package that the SIP revision was developed in accordance with the Texas Health and Safety

Code. EPA Region 6 does not require the State to submit copies of laws and regulations that have been submitted for prior SIP submittals. § 51.232 Astate government agency other than the State air pollution control agency may be assigned responsibility

for carry ing out a portion of the plan. The Chapter 101 revisions identified the TCEQ as the agency

responsible for implementing the SIP.

Subpart M

–

Intergovernmental Consultation The Chapter 101 revisions identified the TCEQ as the agency

responsible for developing, implementing, and enforcing the SIP. Subpart N

–

Compliance Schedule The ERC program establishes an economic incentive program for the voluntary generation and use of ECs. This program does not establish a compliance schedule for any NAAQS, and therefore do not need to address the requirements of 40 CFR part 51, subpart N.

However, the ERC program provides mechanisms by which users of

ECs must demonstrate they have enough credits to cover their use obligations, see section 101.306. Section 101.309 provides for program audits and reporting through which the TCEQ will demonstrate to EPA and the public that the ERC program is operating e ffectively. 

### 54Subpart O

– Miscellaneous Plan Content Requirements

Each plan must include a description of  resources available to the State at the date of the submittal of the plan and during the next 5-
years. Copies of all rules and regulations that are  necessary to attain and maintain the NAAQS must be submitted. Each plan must provide for public notification  wh en a standard has been violated During the development of the Chapter 101  SIP revisions , the TCEQ determined that their fiscal and manpower resources are adequate and will not be adversely

affected through the implementation of therevisions to the General Air Quality

Rules

. This analysis is documented in the preamble to the proposed and final rulemakings. The revisions to Chapter 101 do not est ablish  new emission limits or control strategies, therefore it is not necessary that a copy

of all rules and regulations related to attaining or maintaining the NAAQS be submitted. The Chapter 101 the revisions do not revise the  public notice aspects of the Texas permit programs. Therefore it is not necessary for this SIP submittal to establish procedures whereby the public will be notified of NAAQS violations. Subpart P

–

Protection of Visibility The Chapter 101 revisions are not submitted as part of T exas ’ s plan to protect visibility

. Subpart Q

–

Reports The Chapter 101 revisions do not revise the existing reporting requirements for the emission inventory in the Texas SIP. EPA approved the emission inventory

requirements at 30 TAC 101.10 on August26, 1994 (59 FR 44036). Subpart R

–

Extensions Requirements found in 51, Subpart R are not applicable to the SIP submittal under review in this document. The Chapter 101 revisions submittal is not a request for an 18-month extension. Subpart S

–

Inspec tion/Maintenance Program Requirements Requirements found in 51, Subpart S are not applicable to the SIP submittal under review in this document

. The Chapter 101 revisions are not related to an inspection/maintenance program. Subpart T

–

Conformity

to Stat e or Federal Implementation Plans of Transportation Plans, Programs, and Projects Developed, Funded, or Approved Under Title 23 U.S.C or the Federal

Transit Laws The Chapter 101 revisions do not interfere with or change the transportation conformity budget s developed for each nonattainment and maintenance area pursuant to subpart T.

Subpart U

–

Economic Incentive Programs 40 CFR part 51, s ubpart U establishes requirements for statutorily

mandated economic incentive programs under sections 182(g)(3), 182(g )(5), 187(d)(3), or 187(g) of the CAA

. The ERC program is a discretionary economic incentive program, and therefore not subject to the requirements of subpart U. Subpart W

–

Determining Conformity of General Federal Actions to State or Federal Implement ation

Plans The Chapter 101 revisions do not change or modify the Texas procedures used to determine conformity of federal actions, consistent with subpart W. 

### 55Subpart X

– Provisions for Implementation of 8-hr Ozone NAAQS Requirements found in 51, Subpar t X are for the implementation of the 8-hour ozone NAAQS. The Chapter 101 revisions, while updating air quality rules for use in ozone nonattainment areas, do not establish the measures by which an area will achieve attainment of the 8-hr ozone NAAQS. Subpart Y

–

Mitigation Requirements The Chapter 101 revisions do not create procedures by which Texas could exclude air quality data due to exceptional events. Subpart Z

–

Provisions for Implementation of PM2.5 National Ambient Air Quality Standards Require ments found in 51, Subpart X are for the

implementation of the PM2.5 NAAQS. The Chapter 101 revisions do not establish procedures for implementing the PM2.5 NAAQS. 

### 56

### Does TCEQ have the necessary legal authority to implement the revisions to 30 TAC

Sections 101.302 and 101.306 as part of the SIP?

Texas enforcement provisions are not typically in the State ’ s individual rules but are separately codified. Texas Water Code Chapter 7 contai ns the State ’ s statutory

provi sio ns fo r enforcement of the Texas ERC program . In parti cular, TWC § 7.051 provides for the assessment of administrative penalties by the TCEQ, and § 7.032 provides for injunctive relief by the TCEQ. The TCEQ enf orcement rul e at 30 TAC § 70.5 inco rporates remedies fo und in the state statutes (Texas Water Code and the Texas Health and Safety Code), and permits referrals to EPA for civil, judicial or administrative action. It is our conclusion th at TCEQ ha s adequate legal authority to enforce th e ERC program revisions as part of th e SIP . Once we approve the revisions to the ERC program i nt o the SIP, EPA wi ll be able to enforce it under section 113 of the Clean Air Act.

The 40 CFR part 70, / CAA Title V op erati ng permits program and the 40 CFR part 63, Nati onal Emission Standards for Hazardous Air Pollutants (NESHAPs) have been reviewed and found to have sufficient enforcement provisions. These same enforcement provisions will apply to the ERC Program. The Office of the Attorney General of the State of Texas has provided written opinions for these programs. The opinions state that TCEQ has the necessary legal authority to implement and enforce the programs. TCEQ has the authori ty to have reasonable requirements for measuring and monitoring air emissions and to requi re owners and operators of sources to make and maintain records of the emissions.

The Office of the Attorney General of the State of Texas cited State laws and regulations th at regul ate, at a m

inimum, t he same sources as the Clean Air Act and do so with standards that are no less stringent than those specified by the CAA. The cited laws and regulations are: Texas Health and Safety Code Ann. sections 382.016 (Monitoring Requirements, Examination of Records), 382.021 (Sam

pling Methods and Procedures), 382.0514 (Sampling, Monitoring and Certification); 30 TAC sections 122.132 (Application and Required Information for Initial Permit Issuance, Reopening, Renewal, or General Operating Permits), 122.13 4 (Com plete Application), 122.136 (Application Deficiencies), 122.142 (Permit Content Requirements), 122.143 (General Terms and Conditions), 122.144 (Recordkeeping Terms and Conditions), 122.145 (Reporting Terms and Conditions), 122.146 (Compliance Certificati on Terms and Conditions), 122.165 (Certi ficat io n by Responsible Official; 30 TAC sections 101.8 (Sampling), 101.9 (Sam pling Ports).

Recordkeeping requirements specific to the ERC rule are set forth at § 101.302(g) . The At torney General has determine d that TCEQ i s allowed to prescribe sampling methods and procedures to be used to determ ine violations of and compliance with the TCEQ rules and orders. The ERC rul e provides that any use of monitoring protocols other than those specified in Chapter 115 and Chapter 117 will be approved by EPA (§ 101.302(d)(1)). The rule al so specif

ies procedures i

n the event that monitoring and testing data are unavailable at § 101.302(d) . The opi nio ns of the Texas Attorney General indicate that 57

### TCEQ has the necessary leg al authority to implement and enforce the ERC program i n accordance with the requirements of the Clean Air Act.

EPA ’ s guidance on practicable enforceability (provided in the FDMS docket for this acti on) i s a series of agency memos on limiting potential to em it . While this guidance is not di rectl y applicable to an emissions trading program, the requirements for sufficient

mo nit ori ng do apply to the ERC program . The sources generating and certifying emission reducti ons as ECs m

ust be able to quantify the em issio n reduction over time. The ERC
program meet s EPA ’ s expectations on practicable enforceability by requiring sites to calculate emission reductions using an EPA approved protocol. Facilities subject to the control specifications in Chapters 115 and 117 m ust use the testi

ng and monitoring
met hodologi es identified to show compliance with the emission standards. If this

mo nit ori ng or testi

ng data is unavailable or does not exist, the facility may report actual emissio ns for that period of time using t he methods listed below in the following order of preference: Conti nuous monitoring data; 1. Peri odi c monitoring data; 2. Testi

ng data; 3. Manufacturer ’ s data; 4. Materi al balance. 5. A facilit y must submit justification to the TCEQ when not using the monitoring and testing protocol s in Chapters 115 and 117.

For the above reasons EPA has concluded that the ERC program meet s the Clean Air Act requirements and EPA EIP Guidance expectations for penalties, corrective action, and practi cable enforceability in the integrity element of enforceable. 58

### IV. B. Evaluation of the August 16, 20 07 SIP Submittal

3. Evaluation of the August 16, 2007 Revisions to the Texas ERC Program with respect to the existing SIP-approved language and the EIP Guidance

The evaluation of the ERC program with respect to the EIP Guidance was conducted with
our pro posed approval on October 5, 2005 (70 FR 58146) and final approval on Septem ber 6, 2006 (71 FR 52698). The August 16, 2007, rule package currently under review in this TSD does not change the type of program or functionality of the ERC tradi ng program wit h respect to the EIP Gui dance. Therefore, t he evaluation of th e revisions to the ERC and program at secti ons 101.302and 101.306 will include a line it em

com parison of the federally approved ERC program and the S tate ’ s adopted revisions to determ ine approv abilit y. Approvability of each revision will be based on the EIP Guidance and whether the measure strengthens the SIP. Note that thi s analysis will not reevaluate the portions of the ERC program that have not been revised since our final acti ons on Septe mber 6, 2006.

Table IV-B3.1: Revisions to § 101.302

– General Provisions

Federally Approved Version September 6, 2006 71 FR 52698 Adopted State Language October 4, 2006 Rule Project Number 2005-054- 101-PR Adopted State Language July 25, 2007 Rule ProjectNumber 2006-053- 101-PR Applicable pollutants. (a) Reductions of criteria pollutants, excluding lead, or precursors of criteria pollutants for which an area is designated nonattainment,
may qualify as emission credits. Reductions of one pollutant may

not b e used to meet the requirements for another pollutant, unless: Applicable pollutants. (a) Reductions of criteria pollutants, excluding lead, or precursors of criteria pollutants for which an area is designated nonattainment,
may qualify as emission credits. Reductions of one pollutant may

not be used to meet the requirements for another pollutant, unless urban airshed modeling demonstrates that one ozone
precursor may

be substituted for another, subject to executive director and the Un ited States Environmen tal Protection Agency (EPA) approval. No Change



### 59urban airshed modeling (1) demonstrates that one
ozone precursor may

be substituted for another subject to executive director and United States Environmental Protection Agency (EPA) approval; or Moved to 101.302 (a) No Change

the facility

generating (2) the emission reductions is located outside the Un ited States and: International trading provisions have been moved to 101.305, see discussion below

. No Change

the (A) substitution: International trading provisions have b een moved to 101.305, see discussion below

. No Change

results in a greater (i) health benefit and is of equal or greater benefit to the overall air quality

of the area, as determined by

the executive director; International trading provisions

have been moved to 101.305, see discussion below

. No Change

is from the (ii) reduction of an air contaminant for wh ich the area has been designated as nonattainment or wh ich leads to the for mation of a criteria pollutant for wh ich an area has been designated as nonattainment; and International trading provisions

have been moved to 101.305, see discussion below

. No Change

is for any air (iii) contaminant for wh ich the area has been designated as nonattainment or leads to the for mation of a criteria pollutant for wh ich the area has b een designated as nonattainment; and International trading provisions

have been moved to 101.305, see discussion below

. No Change

the user: (B) International trading provisions have been moved to 101.305, see discussion below

. No Change 

### 60demonstrates that (i) theuse of the reduction does not cause localized health impacts, as determined by

the executive director; International trading provisions

have been moved to 101.305, see discussion below

. No Change

submits all (ii) supporting information for calculations and

mo deling, and any additional information requested by the executive director; and International trading provisions

have been moved to 101.305, see discussion below

. No Change

is located within (iii) 100 kilometers of the Texas - Mexico bor der. International tradi ng provisions

have been moved to 101.305, see discussion below

. No Change

Eligible generator (b) categories. The following categories are eligible to generate emission credits: No change No Change

facilities, including area (1)
sources; No change No Change

mob ile sources; and (2) No change No Change
any facility, including (3) area sources, or mobile source associated with actions by federal agencies under §101.30 of this title (relating to Conformity of General Federal Actions to State Implementation Plans). No change No Change

Emission credit (c) requirements. No change No Change

Emission reduction (1) credits are certified reductions that meet the following requirements: No change No Change

reductions must be (A) enforceable, permanent, quantifiable, real and surplus; No cha nge No Change 

### 61the certified (B) reduction must be surplus at the time it is created, as well as when it is used; No change No Change

in order to become (C) certified, the reduction must have occurred after the most recent y

ear of emissions inventory used in the state implementation plan (SIP); and No change No Change

the facility

's annual (D) emissions prior to the reduction strategy must have been reported or represented in the emissions inventory used for the SIP. No change No Change

Mobile emission (2) reduction cre dits are certified reductions that meet the following requirements: No change No Change

reductions must be (A) enforceable, permanent, quantifiable, real and surplus; No change No Change

the certified (B) reduction must be surplus at the time it is created, as well as when it is used; No change No Change

in order to become (C) certified, the reduction must have occurred after the most recent y

ear of emissions inventory used in SIP; and No change No Change 

### 62the mobile source ’ s (D) annual emissions prior to the emission c redit application must have been represented in the emissions inventory used for the SIP; and No change No Change

the mobile sources (E) must have been included in the attainment demonstration baseline emissions inventory

. No change No Change

Emission redu ctions (3) from a facility

or mobile source that are certified as emission credits under this division cannot be recertified in wh ole or in part as emission credits under another division within this subchapter. No change No Change

Protocol. (d) No change No Change All generators or users (1) of emission credits shall use a protocol which has been submitted by the executive director to the EPA for approval, if existing for the applicable facility or mobile source, to measure and calculate baseline emissions. If the generator or user wishes to deviate from a protocol submitted by the executive director, EPA approval is required before the protocol can be used. Protocols shall be used as follows. No change No Change 

### 63Facilities subject to (A) the emission specifications under §§117.106, 117.206, or 117.475 of this title (relating to Emission Specifications for Attainment Demonstrations; and Emission Specifications) shall quantify reductions in NO X emissions using the testing and monitoring methodologies identified to show compliance with the emission specification. No change Facilities subject to the (A) emission specifications under §§ 117.110, 117.210, 117.310, 117.410, 117.1010, 117.1110, 117.1210, 117.1310, 117.2010, 117.2110 §§ 117.106, 117.206, or 117.475 of this title (r elating to Emission Specifications for Attainment Demonstration Demonstrations ; Emission Specifications for Eight-Hour Attainment Demonstration; and Emission Specifications) shall quantify reductions in NO X emissions using the testing and monitoring method ologies identified to show compliance with the emission specification. Facilities subject to (B) the requirements under §§115.112, 115.121, 115.122, 115.162, 115.211, 115.212, 115.352, 115.421, 115.541,

or 115.542 (relating to Emission Specifications; and Con trol Requirements) shall quantify VOC reductions using the testing and monitoring methodologies identified to show compliance with the emission specifications or the requirements. No Change No Change 

### 64If the executive (C) director has not submitted a protocol for the applicable facility or mobile source to the EPA for approval, the following applies: No Change No Change

the amount of (i) emission credits from a facility or mobile source, in tons per year, will be determined and certified based

on quantification

me thodologies at least as stringent as the methods used to demonstrate compliance with any applicable requirements for the facility

or mobile
source; No Change No Change 

### 65the generator (ii) shall collect relevant data sufficient to characterize the facility ’ s or mobile source ’ s emissions of the affected pollutant and the facility ’ s or mobile source ’ s activity level for all representative phases of operation in

or der to characterize the facility ’ s or mobile source ’ s baseline emissions; No Change No Change

faciliti es with (iii) continuous emissions monitoring systems or predictive emissions monitoring systems in place shall use this data in quantify ing actual emissions; No Change No Change

the chosen (iv) quantification protocol must be made available for public comment for a period of 30 days and must be viewable on the commission ’ s Web site; No Change No Change 

### 66the chosen (v) quantification protocol and
any comments received during the public
comment period shall be submitted to the EPA for a 45-day adequacy review; and No Change No Change

quantification (vi) protocols shall not be accepted for use with this division after a proposed disapproval of the protocol by the EPA in the Federal Register

. quantification protocols

(vi) shall not be accepted for use with this division if the execut ive director receives a letter objecting to the use of the protocol from the EPA during the 45-day adequacy review or the EPA proposes disapproval of the protocol in the Federal Register after a proposed disapproval of the protocol by the EPA in the Federa l Register

. No Change

In the event that the (2) monitoring and testing data required under paragraph (1) of this subsection is missing or unavailable, the facility
may report actual emissions for that period of time using these listed methods in the followingorder of preference to determine actual emissions: No Change No Change

continuous (A) monitoring data; No Change No Change

periodic monitoring (B) data; No Change No Change

testing data; (C) No Change No Change manufacturer ’ s (D) data; No Change No Change 

### 67EPA Compilation of (E) Air Pollution Emission Factors (AP-42), September 2000; or No Change No Change

material balance. (F) No Change No Change When quantify

ing actual (3) emissions in accordance with paragraph (2) of this subsection, the generator shall use the
most conserva tive method for replacing the missing data, submit the justification for not using the methods in paragraph (1) of this subsection, and submit the justification for the method used. No Change No Change

Credit certification. (e) No Change No Change The amountof emission (1) credits in tons per y

ear will be determined and certified, to the nearest tenth of a ton per y

ear. No Change No Change

Applications for (2) certification will be reviewed in order to determine the credibility of the reductions. Reductions determ ined to be creditable will be certified by the executive director. No Change No Change

The applicant will be (3) notified in writing if the executive director denies the emission credit application. The applicant may

submit a revised application in accordanc e with the requirements of this division. No Change No Change 

### 68If a facility ’ s or mobile (4)

source ’ s actual emissions exceed its allowable emission limit, reductions of emissions exceeding the limit may not be certified as emission credits. No Change No Change

Applications for (5) certification of emission credit from reductions quantified under subsection (d)(1)(C) of this section may

only be approved upon completion of the public comment period. No Change No Change

Geographic scope. Except (f) as provided in para graph (3) of this subsection, only emission reductions generated in nonattainment areas can be certified. An emission credit must be used in the nonattainment area in wh ich it is generated unless the user has obtained prior

wr itten approval of the executi ve director and the EPA; and: Geographic scope. Except (f) as provided in § 101.305 of this title (relating to Emission Reductions Achieved Outside the Un ited States) paragraph (3) of this subsection , only emission reductions generated in nonattainment

areas can be certified. An emission credit must be used in the nonattainment area in which it is generated unless the user has obtained prior written approval of the executive director and the EPA; and No Change

a demonstration has (1) been made and approved by th e executive director and the EPA to show that the emission reductions achieved in another country, state,

or nation provide an improvement to the air quality in the county

of
use; or No Change No Change 

### 69the emission credit was (2) generated in a nonattainmentarea that has an equal or higher nonattainment classification than the nonattainment area of use, and a demonstration has been made and approved by the executive director and the EPA to show that the emissions from the nonattainment area wh ere the emission credit is generated contribute to a violation of the national ambient air quality

standard in the nonattainment area of use; or the emission credit was (2) generated in a nonattainment area that has an equal or higher nonattainment classification than the

nonattainment area of use, and a demonstration has been made and approved by the executive director and the EPA to show that the emissions from the nonattainment area wh ere the emission credit is generated contribute to a violation of the national ambient ai r quality standard in the nonattainment area of

use. ; or No Change

a facility is using (3) emission reductions generated outside the Un ited States that have been determined by the executive director to be real, permanent, enforceable, quantifiable, and surpl us to any applicable international, federal, state, or local law and the result would provide a greater health benefit to the area as determined by

the executive director; and the facility : International trading provisions have been moved to 101.305, see discussion below

. No Change

demonstrates that (A) the use of the reduction does not cause localized health impacts, as determined by

the executive director; International trading provisions

have been moved to 101.305, see discussion below

. No Change 

### 70submits a ll (B) supporting information for calculations and modeling, and any additional information requested by the executive director; and International trading provisions

have been moved to 101.305, see discussion below

. No Change

be located within (C) 100 kilometers of the Texas - Mexico bor der. International trading provisions

have been moved to 101.305, see discussion below

. No Change

Recordkeeping. The (g) generator shall maintain a copy of all notices and backup information submitted to the registry

for a minimum of

five years. The user shall maintain a copy of all notices and backup information submitted to the credit registry from the beginning of the use period and for at least five years after. The user shall also make such records available upon request to rep resentatives of the executive director, EPA, and any local enforcement
agency . The records must include, but not necessarily be limited to: No Change No Change

the name, emission (1) point number, and facility identification number of each facility

or any other identify

ing number for each mobile source using emission credits; No Change No Change

the amount of emission (2) credits being used by each facility

or mobile source; and No Change No Change 

### 71the specific number, (3) name, or other identification of emission credits used for each facility

or mobile

source. No Change No Change

Public information. All (h) information submitted with notices, reports, and trades regarding the nature, quantity, and sales price of emissions associated with the use, generation, and
transfer of an emission credit is public information and
may not be submitted as confidential. Any

claim of confidentiality

for this ty

pe of information, or failure to submit all information may result in the rejection of the emission credit application. Al l nonconfidential notices and information regarding the generation, availability
, use, and transfer of emission credits shall be immediately made available to the public. No Change No Change

Authorization to emit. An (i) emission credit created under this di vision is a limited authorization to emit the pollutants identified in subsection (a) of this section, unless otherwise defined, in accordance with the provisions of this section, 42 USC §§ 7401, the Texas Health and Safety

Code Chapter 382, as well as
reg ulations promulgated thereunder. An emission credit does not constitute a property right. Nothing in this division may

be construed to limit the authority of the commission

or the EPA to terminate or limit such authorization. No Change No Change 

### 72Programparticipation. The

(j) executive director has the authority to prohibit an

or ganization from participating in emission credit trading either as a generator or user, if the executive director determines that the

or ganization has violated the requirements of the program

or abused the privileges provided by the program. No Change No Change

Compliance burden and (k) enforcement. Users may not transfer their compliance burden and legalresponsibilities to a thirdpartyparticipant. Thirdparty participants may

only act in an advisory

capacity to the user. No Change No Change

Credit ownership. The (l)

own er of the initial emission credit certificate shall be the

own er or operator of the facility or mobile source creating the emission reduction. The executive director may

approve a deviation from this subsection considering factors such as, but not limited to: No Change No Change

wh ether an entity

other (1) than the owner or operator of the facility

or mobile source incurred the cost of the emission reduction strategy ; or No Change No Change

wh ether the owner or (2) operator of the facility

or mobile source lacks the potential to generate 1/10 ton of credit. No Change No Change



### The revisions to section 101. 302 submit ted on October 24, 2006, are approvabl e as discussed in Section IV.A of this TSD. The revisions to section 101.302 submitted on August 16, 2007 u

pdate the cross-references to th e recodi fied Chapter 117. EPA
propose d approval of the Chapter 117 recodification on July 11, 2008 (73 FR 39900) and 73

### finalized approval of the recodification on December 3, 2008 (73 FR 73562). The

fo llo wing table details the cross-reference change from the SIP-approved language to the newly recodi fied Chapter 117 sections. This analysis shows that the cross-references have been updated correctly and no previously SIP-approved sections have been overlooked in th e recodi ficat io n. In our March 23, 2007, com ment l etter EPA noted that the propos ed revisions to § 101.302(d)(1)(A) incorrectly included a citation to § 117.3310

. The TCEQ agreed with our comment and removed th e cross-referenced citation prior to adopti on. The revisions to section 101.302 submitted on August 16, 2007 are approvable.

Table IV-B3. 2 : Cross-References between S ection 101.302 and Chapter 117

SIP-Approved References in § 101.302 Recodified Chapter 117 References in the August 16, 2007 SIP Submittal of Section

101.302 § 117.106

–

Emission Specifications f or Attainment Demonstrations for Utility Electric Generation in Ozone Nonattainment Areas § 117.1010

– Emission Specifications for Attainment Demonstration at Major Utility Electric Generation Sources in the Beaumont-Port Arthur Ozone Nonattainment Area

§ 117.1110

–

Emission Specifications for Attainment Demonstration at Major Utility Electric Generation Sources in the Dallas-Fort Worth Ozone Nonattainment Area

§117.1210

–

Emission Specifications for Attainment Demonstration at Major Utility Electric Gen eration Sources in the HGB Ozone Nonattainment Area

§ 117.1310

–Emission Specifications for Attainment Demonstration at Major Utility Electric Generation Sources in the Dallas-Fort Worth 8- Hour Ozone Nonattainment Area 

### 74§ 117.206

– Emission Specification s for Attainment Demonstrations for Industrial, Commercial, and Institutional Combustion Sources in Ozone Nonattainment Areas § 117.110

– Emission Specifications for Attainment Demonstration for Combustion Control at Major Industrial, Commercial, and Inst itutional Sources in the Beaumont-Port Arthur Ozone Nonattainment Area

§ 117.210

–

Emission Specifications for Attainment Demonstration for Combustion Control at Major Industrial, Commercial, and Institutional Sources in the Dallas-Fort Worth Ozone Nonatt ainment Area

§ 117.310

–

Emission Specifications for Attainment Demonstration for Combustion Control at Major Industrial, Commercial, and Institutional Sources in the Houston-Galveston-Brazoria Ozone Nonattainment Area

§ 117.410

–

Emission Specifications for Attainment Demonstration for Combustion Control at Major Industrial, Commercial, and Institutional Sources in the Dallas-Forth Worth 8-Hour Ozone Nonattainment Area § 117.475

–

Emission Specifications for Boilers, Process Heaters, and Stationary Engin es and Gas Turbines at Minor Sources §117.2010

– Emission Specifications for Combustion Control at Minor Sources in the Houston-Galveston-BrazoriaOzone Nonattainment Area

§ 117.2110

–

Emission Specifications for Combustion Control at Minor Sources in th e DallasFort Worth 8-Hour Ozone Nonattainment Area



### Table IV-B 3.3 : Revisions to Section 101.306

Federally Approved Version September 6, 2006 71 FR 52698 Adopted State Language October 4, 2006 Rule Project Number 2005-054- 101-PR Adopted State Language July 25, 2007 Rule Project Number 2006-053- 101-PR Uses for emission credits. (a) Un less precluded by a commission order or a condition or conditions within an authorization under the same commission account number, emission credits may

be used as the followi ng: No change No change 

### 75offsets for a new source, (1) as defined in § 101.1 of this title or major modification to an existing source; No change No change

mitigation offsets for (2) action by federal agencies under § 101.30 of this title; No change No change

an alternative means of (3) compliance with VOC and NOx reduction requirements to the extent allowed in Chapters 114, 115, and 117 of this title; No change No change

reductions certified as (4) emission credits may be used in netting by

the

or iginal applicant, if n ot used, sold, reserved for use, or otherwise relied upon, as provided in § 116.150 of this title; No change No change

an annual allocation of (5) allowances as provided in § 101.356 of this title; an annual allocation of (5) allowances as provided in § 101.356 and § 101.399 of this title; No change

compliance with motor (6) vehicle fleet requirements to the extent allowed by § 114.201 of this title; No change No change

compliance with other (7) requirements as allowable within the guidelines of local, state, and federa l laws. No change No change

Credit use calculation. (b) No change No change The number of emission (1) credits needed by the user for offsets shall be determined as provided in § 116.150 of this title. No change No change 

### 76For emission credits (2) used in compliancewith Chapter 114, 115, or 117 of this title, the number of emission credits needed should be determined according to the following equation plus an additional 10% to be retired as an environmental contribution. Figure: 30 TAC § 101.306(b)(2) No change No change

For emission credits (3) used to comply with §§ 117.108, 117.210, or 117.223 of this title (relating to System Cap; and Source Cap), the number of emission credits needed for increasing the 30-day

ro lling average cap or maximum daily

cap should be det ermined according to the following equation plus an additional 10% to be retired as an environmental contribution. Figure: 30 TAC § 101.306(b)(3) No change For emission credits used (3) to comply with §§ 117.123, 117.223, 117. 32 0, 117.323, 117.423, 117.1020, 117.1120, or 117.1220 §§ 117.108, 117.210, or 117.223 of this title (relating to System Cap; and Source Cap and System Cap , the number of emission credits needed for increasing the 30-day

ro lling average emission cap or maximum daily cap should be determin ed according to the following equation plus an additional 10% to be retired as an environmental contribution. Figure: 30 TAC § 101.306(b)(3) (see below

for changes to this figure) 

### 77Emission credits used (4) for compliance with any other applicable program should be determined in accordance with the requirements of that program and must contain at least 10% extra to be retired as an environmental contribution, unless otherwise specified by that program. No change No change

Notice of intent to use (c) emission cred its. No change No change

For emission credits (1) wh ich are to be used as offsets in a New Source Review permit in accordance with Chapter 116 of this title, the emission credits must be identified prior to permit issuance. Prior to construction, the offsets must be provided through submittal of a completed EC-3 Form, Notice of Intent to Use Emission Credits, along with the

or iginal emission credit certificate. No change No change 

### 78For emission credits that (2) are to be used for compliance with the requirements of Chapter 114, 115, or 117 of this title or other programs, the user must submit a completed EC-3 Form along with the original emission credit certificate, at least 90 days prior to the planned use of the emission credit. Emission credits may

be used onl y after the executive director grants approval of the notice of intent to use. The user must also keep a copy of the emission credit certificate, the notice, and all backup in accordance with § 101.302(g) of this title. No change No change

If the executive director (3) denies the facility

or mobile source ’ s use of emission credits, any affected person by the executive director ’ s decision may

file a motion for reconsideration within 60 days of the denial. Notwithstanding the applicability

provisions of § 50.3 1(c)(7) of this title, the requirements of § 50.39 of this title shall apply . Only

an affected
person may

file a motion for reconsideration. No change No change 

### 79

### On July 25, 2007, the TCEQ also adopted revisions to Figure: 30 TAC § 101.306(b)(3) as

detailed below:

Calculation of Emission Reductions Needed for System Cap or Source Cap



#     

#  
2000 365

1 1 

###   

#  

  N

i N

i ii n 

### RH RH ECs



### Where: N = the total

number of emission units in th e source cap i= each emission unit in the source cap H i 

### = actual daily heat input, in million British thermal units (MMBtu) per day, as calculated according to § 117.108(c)(1), §117.210(c)(1), or §117.223(b)(1) of this title §§ 117.123(b)(1) or (2) , 117. 223(b)(1) or (2)
, 117.320(c)(1)

–

(3) , 117.323(b)(1) or (2) , 117.423(b)(1) or (2)
, 117.1020(c)(1) or (2) , 117.1120(c)(1) or (2) , or 117.1220(c)(1) or (2) of this title R i 

### = the facility ’ s emission factor, in pounds (lb)/MMBtu, is defined as in § 117.108(c)( 1), §117.210(c)(1), or §117.223(b)(1) §§ 117.123(b)(1) or (2) , 117.223(b)(1) or (2) , 117.320(c)(1)

– (3) , 117.323(b)(1) or (2)
, 117.423(b)(1) or (2) , 117.1020(c)(1) or (2)
, 117.1120(c)(1) or (2), or 117.1220(c)(1) or (2) of

thi s ti tl e H n 

### = the maximum dail

y heat input, in MMBtu per day, expected for an emissio n unit during the use period R n 

### = the maximum emissio n factor, in lb/MMBtu, expected for an emission unit duri ng the use period

The revisions to section 101. 306 submit ted on October 24, 2006, are appr ovable as discussed in Section IV.A of this TSD. The revisions to section 101.306 and Figure 30 TAC § 101.306(b)(3) submitted on August 16, 2007 u pdate the cross-references to th e recodi fied Chapter 117. EPA proposed approval of the Chapter 117 recodific ati on on July 11, 2008 (73 FR 39900) and finalized approval of the recodification on December 3,2008 (73 FR 73562). The following table details the cross-reference change from the SIPapproved language to the newly recodified Chapter 117 sections. This analysis shows that th e cross-references have been updated correctly and no previously SIP-approved sections have been overlooked in the recodification. In our March 23, 2007, com ment l etter EPA noted that the proposed revi sio ns to § 101.306(b)(3) i nclude d a reference to § 117.3123 but that Figure 30 TAC § 101.306(b)(3) did not include a corresponding reference to § 117.3123. The TCEQ agreed with our comment and removed the cross-referenced cit ati on at § 101.306(b)(3) pri or to adopti on. The revisions to section 101.306 submitted on August 16, 2007 are approvable.

Table IV-B3.4 : Cross-References between Section 101. 306 and Chapter 117 80SIP-Approved References in § 101.306 Recodified Chapter 117 References in the August 16, 2007 SIP Submittal of Section

10 1.306 § 117.108

–

System Cap for Utility

Electric Generation in Ozone Nonattainment Areas § 117.1020

– System Cap for Utility

Electric Generation Sources in Beaumont-Port Arthur Ozone Nonattainment Area

§ 117.1120

–

System Cap for Utility

Electric Generati on Sources in Dallas-Fort Worth Ozone Nonattainment Area

§ 117.1220

–

System Cap for Utility

Electric Generation Sources in Houston-Galveston-Brazoria Ozone Nonattainment Area § 117.210

–

System Cap for Industrial, Commercial, and Institutional Combustion Sources in Ozone Nonattainment Areas § 117.320

– System Cap for Industrial, Commercial,and Institutional Sources in Houston-GalvestonBr azoria Ozone Nonattainment Area § 117.223

–

Source Cap for Industrial, Commercial, and Institutional Combustion Sources in Ozone Nonattainment Areas § 117.123

– Source Cap for Industrial, Commercial, and Institutional Sources in Beaumont-Port Arthur Ozone Nonattainment Area

§ 117.223

–

Source Cap for Industrial, Commercial, and Institutional Sources in Dallas-Fort Worth Oz one Nonattainment Area

§ 117.323

–

Source Cap for Industrial, Commercial,and Institutional Sources in Houston-GalvestonBr azoria Ozone Nonattainment Area

§ 117.423

–

Source Cap for Industrial, Commercial, and Institutional Sources in Dallas-Fort Worth 8- HR Ozone Nonattainment Area 

### 81

### IV. B. Evalution of the August 16, 2007 SIP Submittal

4. Evaluation of the August 16, 2007, SIP submittal with respect to section 110(l) of the Clean Air Act?

Secti on 110(l) of

the Clean Air Act states:

Each revision to an implementation plan submitted by a State under this Act shall be adopted by such State after reasonable notice and public hearing. The Administrator shall not approve a revision of a plan if the revision w ould interfere with any app licable requirement concerning attainment and reasonable further progress (as defined in section 171), or any other applicable requirement of this Act.

Thus, under section 110(l), this SIP revision must not interfere with attainment or reasonable further progress or any other applicable requirement of the Act.

Because this analysis only focuses on the revisions to sections 101.302 and 101.306 of the E RC program , the 110(l) analysis will also only focus on these pieces of the August 16, 2007 SIP revision. The August 16, 2007, updates to the ERC program wi ll not i nt erfere wit h attai nment , reasonable further progress or any other applicable requirement o f th e Act because the revisions update references to the newly recodified Chapter 117 sections. These revisions are nonsubstantive and will not interfere with the SIP-approved functionality of the ERC program , which has already been demonstrated to be con sist ent wit h 110(l) through our 2006 approval. 82

### V. Conclusion

The technical analysis provided in the preceding sections has compared the applicable sections of the CAA and 40 CFR Part 51 to TCEQ ’ s October 24, 2006, proposed revisio ns to the SIP, enacted at 30 TAC Chapter 101, Secti ons 101.302, 101.305, 101.306, 101.338, 101.339, 101.372, 101.373, 101.375, 101.376, and 101.378. The technical analysis also reviewed TCEQ ’ s August 16, 2007, proposed revisions to the SIP, enacted at 30 TAC Chapter 101, Sections 101.1, 101.22, 101.302, 101.306, 101.350, 101.351, 101.353, 101.354, 101.360, 101.372, 101.376, 101.383, and 101.385.

This analysis found that the adoption of the revisions to sections 101.302, 101.305, and 101.306 submitted on

October 24, 2006, i s consistent with the CAA and 40 CFR Part 51. EPA also finds that the adoption of the revisions to sections 101.302 and 101.306 submit ted on August 16, 2007, i s consistent with the CAA and 40 CFR Part 51. Therefore, it is recommende d that a proposed approval of these sections be published.

The revision s to secti ons 101.338 and 101.339 submit ted on October 24, 2006 remain available for EPA review and action at a later date. Likewise, the revisions to sections 101.1, 101.383, and 1 01.385 submit ted on August 16, 2007, remain available for EPA review and action at a later date.

In a concurrent, but separate rulemaking, EPA is proposing approval of the DERC
program revisions at sections 101.372, 101.373, 101.375, 101.376, and 101.37 8 submit ted October 24, 2006, and secti ons 101.372 and 101.376 submitted August 16, 2007.

EPA has already finally approved the August 16, 2007, revisions to sections 101.350, 101.351, 101.353, and 101.354. 83